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Author: 


Borden,  John 


Title: 


An  essay  on  value 


Place: 


Chicago 


Date: 


[1 897] 


^-^ao-^a-:;^ 


MASTER   NEGATIVE  « 


COLUMBIA  UNIVERSITY  LIBRARIES 
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Borden,  John,  1825-1919. 

All  essay  on  value,  with  a  short  account  of  American 
currency,  by  John  Borden.  Chicago,  Rand,  McNallv  & 
CO.  il897] 

232  p.    19'". 


L  Value.    2.  Money— U.  S.— Hist. 


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LIBRARY 


School  of  Business 


III 


AN   ESSAY 


ON 


VALUE 


WITH 


A  Short  Account 


OF 


AMERICAN   CURRENCY 


1 


BY 

JOHN  BORDEN. 


CHICAGO  : 

RAND,  McNALLY  &  CO., 

i66-i68  Adams  Street. 


INTENTIONAL  SECOND  EXPOSURE 


ERRATA. 
Page  25,  ninth  line  from  bottom : 


^  should  read  ^^. 


Page  56,  ninth  line  from  bottom : 

-i+x+h<5^  should  read  i-|-x+h>^, 


AN   ESSAY 


ON 


VALUE 


WITH 


A  Short  Account 


OF 


AMERICAN   CURRENCY 


BY 

JOIIX  BORDEN. 


CHICAGO  : 

RAND,  McXALLV  &  CO., 
166-168  Adams  Street. 


i 


(4 


l^AM 


CONTENTS. 


Copyright  1897, 

By 
John  Borden. 

iA//  Rights  Reserved.) 


JIM 
3C4 


PAGE. 

I.   Utility, - 

II.   Use  Value, g 

III.  Relative  Value, 22 

IV.  Exchange  Value, 23 

V.  Market  Value, 32 

VI.   Natural  Value, 52 

VII.   Money  Value, j^q 

VIII.  American  Currency, 148 

A  National  Currency, i^g 


VALUE. 


In  economics  a  correct  idea  of  value  is  said  to 
be  of  the  utmost  importance ;  for  from  no  source 
do  so  many  errors  and  so  much  difference  of 
opinion  in  that  science  proceed  as  from  the  vague 
ideas  which  are  attached  to  the  word  value. 
(Ricardo,  Chap,  i.)  The  meaning  of  the  word 
utility  seems  to  lack  precision  also,  and  because 
of  its  relation  to  the  word  value  will  be  first 
noticed. 


I. 


UTILITY. 

Utility  has  been  defined  as  a  capacity  to  satisfy 
a  desire,  or  serve  a  purpose ;  and  wealth  has  been 
defined  as  utilities  embodied  in  material  objects. 
As  thus  defined,  the  utility  of  a  thing  is  supposed 
to  be  inherent  in  it,  and  is  a  constant  quantity ;  for 
the  potential  capacity  of  a  thing  to  satisfy  a  want 
or  serve  a  purpose  would  exist  and  continue  to  be 
the  same  whether  the  want  or  purpose  existed  or 
not.  A  pound  of  iron,  a  bushel  of  grain,  or  a 
yard  of  cloth  would  contain  as  much  utility  at 
one  time  and  place  as  at  another ;  as  much  in  the 

(6) 


I 


6 


VALUE. 


i 


hands  of  its  producer  as  in  those  of  a  consumer, 
and,  in  fact,  the  same  amount,  whether  there  was 
a  consumer  at  all  or  not ;  the  utility  of  coal  would 
be  no  more  increased  by  carrying  it  from  than  to 
Newcastle.      A  superfluity  of   anything    would 
contain  as  much  utility,  per  unit  of  quantity,  as  a 
scarcity.     A  gallon  of  water  would  contain  a  cer- 
tain quantity  of  utility,  and  a  deluge  an  infinite 
quantity  of  it.     The  relative  utility  of  any  two 
commodities  per  units  of  quantity  would  be  the 
same  everywhere  and  to  everybody ;  the  relative 
utility  of  grain  and  cloth  would  be  the  same  in 
Dakota  as  in  New  England.     In  every  exchange 
there  would  be  a  transfer  of  equal  or  unequal 
utilities ;  in  the  first  of  which  cases  neither  party 
would  gain  anything,  and    in   the  second,  one 
party  would  gain  and  the  other  lose. 

The  same  thing  has  a  capacity  to  be  injurious 
as  well  as  useful.  A  small  quantity  of  water  will 
quench  a  man's  thirst  or  suffocate  him ;  a  small 
fire  will  warm  him  or  burn  him  seriously. 
Where  is  the  utility  of  water  in  floods,  fire  in  a 
conflagration,  or  air  in  a  cyclone  ? 

A  capacity  to  satisfy  a  desire  or  serve  a  purpose 
implies  the  existence  of  the  use  or  purpose  and 
has  a  relation  thereto ;  even  a  potential  utility  has 
reference  to  a  potential  use  or  purpose.  Since 
the  actual  utility  of  an  object  depends  upon  the 
existence  of  a  demand  for  it,  the  degree  of  its 
utility,  per  unit  of  quantity,  depends  upon  how 
much  it  is  wanted ;  therefore,  actual  utility  is  a 


VALUE.  7 

variable  and  not  a  constant  quantity ;  and  the 
relative  utility  of  any  two  things,  per  units  of 
quantity,  varies  from  time  to  time  and  place  to 
place,  to  the  same  person,  and  to  different 
persons. 

Using  the  word  utility  in  a  loose,  general,  and 
indefinite  sense,  it  has  been  said  that :  '*  The  util- 
ity of  an  object  consists  in  its  quality  of  being 
useful  for  human  purposes  generally,  and  the 
degree  of  its  utility  is  to  be  measured  by  the 
importance  of  such  purposes,"  and,  therefore, 
"  water,  coal,  or  iron  is  more  useful  than  alcohol, 
gold,  or  diamonds." 

While  this  may  be  useful  information,  it  is  more 
important  to  everyone  to  determine  from  time  to 
time  the  relative  utility  to  him,  per  units  of 
quantity,  of  any  two  commodities  than  to  ascer- 
tain that  one  of  them  is  more  useful  than  the 
other  for  human  purposes  generally.  In  fact, 
everyone,  in  dealing  with  commodities,  consults 
his  own  interest  and  acts  on  his  own  behalf;  and 
to  that  end  he  estimates  their  relative  utility  to 
him  for  specific  amounts  of  each  at  the  time,  and 
from  time  to  time,  and  does  not  govern  his  con- 
duct by  any  loose  notions  which  he  or  others 
may  entertain  as  to  their  general  utility  to  man- 
kind. If  he  had  a  hollow  tooth,  he  would  prob- 
ably consider  enough  gold  to  fill  it  and  preserve 
the  tooth  to  be  more  useful  to  him  for  that  pur- 
pose than  a  ton  of  water,  coal,  or  iron ;  or,  if  he 
required  a  certain  quantity  of  alcohol  for  some 


8 


VALUE, 


ii 


I 


purpose  in  the  arts  or  in  medicine,  for  which 
alcohol  was  suitable  and  water  unsuitable,  that 
alcohol  was  more  useful  to  him  for  that  purpose 
than  water.      A  coat  would  evidently  be  more 
useful  to  a  man  who  had  none,  especially  in 
winter,  than  to  a  dealer  in  coats  who  had  more 
than  he  could  use  or  sell ;  and  a  loaf  of  bread 
would  be  more  useful  to  a  hungry  man  than  to  a 
baker  who  had  an  overstock.    So,  also,  a  surplus 
of  grain  and  provisions  would  be  less  useful  to 
their  producers  than  to  others  who  lacked  food 
and  needed  such  supplies ;  also,  a  surplus  of  cloth 
and  hardware    would  be    less    useful    to    their 
producers  than  food  and  other  things  which  they 
wanted.     And  if  a  person  had  more  of  those 
things  which  are  called  necessaries  than  he  could 
use  or  consume  before  they  would  spoil  or  decay, 
he  might  justly  consider  a  useless,  cumbersome* 
and  perishable  superfluity  of  them  to  be  of  less 
utility  to  him  than  a  comparatively  small  quan. 
tity  of  gold,  or  even  an  imperishable  and  brilliant 
diamond. 


II. 


USE    VALUE. 

Anything  which  can  satisfy  a  man's  desire 
need,  use,  or  purpose-that  is  to  say,  his  want  or 
wants—has  value  to  him,  or  a  use  value ;  which 
phrase  is  here  employed  to  signify  the  value  of 
a  thing  to  one  person  only,  or  to  each  person 


VALUE.  9 

separately.  Value  is  not  inherent  in  a  thing, 
for  the  want  is  external  to  it.  A  want,  as  hunger 
or  thirst,  can  exist  in  the  absence  of  any  means 
to  satisfy  it ;  but  in  the  absence  of  any  want,  use, 
or  purpose  to  which  a  thing  can  be  applied,  it 
has  no  actual  value,  and  any  such  quality  which 
may  be  imputed  to  it  is  merely  potential  or 
imaginary.  In  fact,  value  exists  only  when  there 
is  a  want  and  a  means  available  to  satisfy  it. 
Treasure  sunk  in  the  ocean  has  no  actual  value ; 
to  a  man  in  a  desert,  water  in  the  clouds  or  else- 
where has  no  actual  value.  The  Garden  of  Eden 
had  an  actual  value  to  Adam  while  he  was  in  it, 
and  only  a  potential  value  to  him  after  he  was 
put  out  of  it. 

A  thing  may  have  a  use  value  for  the  purpose 
of  satisfying  an  imaginary  want;  quack  medi- 
cines may  cure  imaginary  ills,  and  furnish  cheap 
substitutes  for  the  bones  and  relics  of  the  saints, 
holy  shrines,  pretended  relics  of  the  true  cross, 
and  the  holy  coat  of  Treves.  Formerly  the  cata- 
combs of  Rome  had  nearly  as  great  a  value  to 
the  Church  as  her  treasury  of  good  works.  If 
the  owner  of  a  gem  finds  that  it  is  bogus,  or  of  a 
picture  that  it  is  a  copy,  its  value  to  him  declines. 
When  the  turquoise  ceases  to  be  a  talisman 
against  the  "  evil  eye,"  the  stone  will  lose  in  use 
value  to  the  Persian ;  so,  also,  as  to  all  fetiches, 
charms,  and  amulets. 

The  value  of  a  thing  to  anyone  includes  all  the 
uses  and  purposes  to  which  it  can  be  applied  by 


10 


VALUE. 


him;  e .  g.,  grain  has  a  use  value  for  seed,  food, 
manufacture,  and  also  for  the  purpose  of  exchange 
for  other  things.     Also,  the  same  thing  may  have 
a  value  to  different  persons  for  different  purposes. 
The  value  of  a  commodity  to  a  merchant  lies  in 
the  profit  which  he  can  obtain  by  dealing  in  it, 
while  the  value  of  opium,  tobacco,  coffins,  or  any 
other  thing  to  its  consumer  is  quite  different. 
The  product  of  one  person  may  be  the  tools  or 
raw  material  of  another.    A  thing  may  have  a 
present  value  for  the  purpose  of    satisfying  a 
future  want.    A  prudent  man  provides  before- 
hand for  his  future  wants,  especially  those  which 
ire  recurrent  and  involuntary ;  and,  therefore,  he 
stores  away  corn  in  his  granary,   food  in    his 
larder,  and  riches  in  his  treasury,  because  of  their 
value  to  him  for   consumption  and    exchange, 
present  and  prospective. 

Use  value  is  a  variable  quantity :     The  supply 
and  the  demand  are  both  variable. 
The  supply  varies: 

In  quality — A  good  timepiece  is  more  useful 
than  a  poor  one ;  cloth  may  be  all  wool  or  partly 
waste  or  shoddy.  Nearly  all  commodities  vary 
in  quality.  There  are  more  than  loo  grades  of 
wool;  the  same  fleece  sorts  into  seven  or  more 
qualities.  In  the  Chicago  market  there  is  red 
and  white  wheat,  winter  and  spring,  divided  into 
about  twenty  grades ;  of  Indian  corn  there  are  ten 
grades;  oats,  six  grades;  barley,  five  grades;  butter, 
six  or  more  grades ;  cattle  of  numerous  grades. 


VALUE. 


11 


In  quantity — The  supply  may  vary  from  noth- 
ing to  a  superabundance.  There  may  be  too 
much  of  such  a  useful  thing  as  water.  A  person 
may  have  no  food,  or  barely  enough  to  sustain 
life,  or  more  than  he  can  consume  before  it 
will  spoil.  In  some  parts  of  the  country,  when 
newly  settled,  Indian  com  has  been  used  for 
fuel,  and  fruit  so  abundant  as  to  be  left  to  rot 
on  the  ground;  the  potato  crop  of  1895  was  so 
abundant  as  not  to  be  worth  digging  in  places 
remote  from  market,  being  worth  at  Chicago,  in 
the  early  spring  of  1896,  about  16  cents  per 
bushel  by  the  car  load.  Formerly,  in  Australia, 
the  surplus  carcasses  of  sheep  were  used  for  fuel 
and  the  ashes  sold  as  a  fertilizer ;  and  surplus 
cattle  in  South  America  had  no  value  except  for 
their  hides  and  tallow.  An  excess  of  anything 
beyond  what  its  owner  can  use  or  consume  him- 
self before  it  will  spoil  or  decay,  has  no  value  to 
him  except  to  exchange  for  something  else  which 
he  wants  or  desires. 

The  demand  varies : 

A  person  may  be  more  hungry  or  thirsty  at 
one  time  than  at  another,  or  want  clothing  more 
when  it  is  cold  than  when  it  is  warm.  He  usually 
wants  any  necessary,  useful,  or  agreeable  thing 
more  when  he  has  none  of  it  than  when  he  is 
partially  supplied.  Beyond  the  point  of  neces- 
sity, the  intensity  of  his  desire  usually  decreases 
as  the  supply  increases  up  to  the  limit  of  extreme 
abundance. 


12 


VALUE. 


Use  Value,  Its  Existence  and  Degree, 


Its  existence  depends  solely  upon  a  demand 
and  an  available  supply,  and  not  upon  the  source 
of  the  supply  or  its  cost  of  production. 

Cost  is  the  sacrifice  made  to  procure  a  thing ; 
value  is  the  benefit  which  can  be  derived  from  it, 
which  is  the  same  whether  the  thing  costs  much, 
little,    or    nothing.      Water    derived    from    the 
clouds  or  a  living  spring  has  the  same  value  to 
quench  thirst,  or  for  any  other  purpose,  as  if  the 
same  water  had  been  filtered  or  distilled  out  of 
some  solution.    A  lump  of  gold  has  the  same 
value  to  its  finder  as  if  he  had  obtained  it  after 
great  labor.    A  coat  will  keep  a  man  as  warm  if 
it  be  a  gift  as  if  it  were  acquired  at  great  cost. 
Cloth  woven  on  a  hand-loom  has  no  greater  value 
than  if  the  same  cloth  had  been  woven   on  a 
loom  propelled  by  wind,  water,  or  steam.     No 
sensible  person  would  consider  the  same  thing 
to  be  of  greater  value  to  him  merely  because  it 
was  produced  at  great  cost.     If  a  thing  is  not 
wanted  it  has  no  actual  value,  whether  its  cost 
was  much  or  little. 

But  a  demand  converts  a  potential  into  an 
actual  supply.  "The  paving  of  the  streets  of 
London  enabled  the  owners  of  some  barren  rocks 
on  the  coast  of  Scotland  to  draw  a  rent  from 
what  never  afforded  a  rent  before ;  also,  the  for- 
ests of  Norway  found  a  market  in  Great  Britain 
which  they  could  not  find  at  home  ;  also,  the  sur- 


VALUE. 


13 


plus  wool  of  England  found  a  market  in  Flan- 
ders, and,  after  the  Union,  the  Highland  cattle 
found  a  market  in  England ;  those  bred  on  the 
most  uncultivated  moors,  in  proportion  to  their 
weight  and  goodness,  brought  the  same  price  as 
those  raised  upon  the  most  improved  land." 
(Wealth  of  Nations.) 

The  degree  of  the  use  value  of  a  supply,  per  unit 
of  quantity,  depends  solely  upon  its  quality,  and 
its  quantity  relative  to  the  demand  for  it,  increas- 
ing with  its  quality  and  decreasing  as  its  quantity 
increases. 

Quality  may  be  due  to  soil  and  climate,  as  in 
fruits,  cotton,  coffee,  etc.;  or  to  lapse  of  time, 
which  improves  coffee,  wine,  and  distilled  liquors, 
and  injures  fruit,  meat,  and  other  things ;  or  to 
the  care,  skill,  and  honesty  exercised  in  the  pro- 
duction of  a  thing. 

Scarcity  and  abundance  have  the  same  effect 
upon  the  degree  of  use  value,  whether  the  cause 
is  natural  or  artificial,  as  a  siege,  blockade,  or  a 
comer  in  the  article.  In  Egypt,  during  the 
years  of  plenty,  food  was  of  little  worth ;  but 
during  the  years  of  scarcity  Pharaoh  acquired  all 
the  property  of  the  Egyptians  and  reduced  them 
to  slavery,  although  there  was  grain  enough  in 
Eg^pt  to  feed  its  people,  and  also  to  supply  others. 

Wants.  Adam  Smith  said :  "A  man  is  rich 
or  poor  according  to  the  degree  in  which  he  can 
afford  the  necessaries,  conveniences,  and  amuse- 
ments of  human  life." 


14 


VALUE. 


A  savage  and  a  civilized  man  differ  in  their 
notions  about  wealth.  To  each  of  them  food  and 
dnnk  of  some  kind  are  clearly  necessaries  ;  cloth- 
ing and  shelter  may  not  be,  for  a  part  of  mankind 
go  naked  and  lie  on  the  ground.  As  a  man 
acquires  knowledge  his  views  alter  and  his  wants 
multiply.  Knowledge  discovers  needs  and  wants 
and  also  the  means  to  satisfy  them.  The  first  hut 
was  a  luxury ;  the  first  clothing,  the  first  fire  the 
first  salt,  etc. 

During  -  the  ages  of  faith  "  those  who  aspired 
to  be  saints  believed   in  mortifying   the  flesh. 
Some  never  washed  themselves,   nor  disturbed 
the  vermin   with  which  they  were  infested  ;  so 
far  as  they  caused  pain  they  were  increasing  the 
stock  of  the  aspirant  s  merits  ;  that  treasure  which 
he  was  laying  up  in  heaven.     Greater  knowledge 
has  caused  piety  to  assume  a  more  rational  form. 
It  IS  not  now  deemed  essential  to  a  saint  that  he 
should  be  dirty  and  lousy,  or  a  nest  of  microbes 
and  bacteria,  nor  that  the  temple  of  God  should 
be  a  chamel  house.     Now  the  wise  man  prefers 
a  good  house  well  aired  to  a  cave  or  a  hole  in  the 
ground  ;  food  in  wholesome  variety,  well  cooked, 
to  raw  fish  or  flesh ;  suitable  and  clean  clothes  to 
dirty  rags  and  skins  ;  and  is  glad  if  he  can  justly 
acquire  the  means  to  satisfy  his  voluntary  and 
involuntary,  natural  and  acquired,  present  and 
prospective,  real  and  imaginary  wants. 

Cost  and  Use    Value,    If  nature  had  supplied 
everything  which  is  wanted,  as  a  free  gift,  every 


VALUE. 


15 


want  would  find  full  satisfaction  in  a  gratuitous 
supply.  But  when  the  acquisition  of  a  thing 
involves  cost,  the  demand  for  it  becomes  stinted 
towards  the  point  where  it  would  be  as  easy  to 
endure  the  want,  or  so  much  of  it  as  remained 
unsatisfied,  as  to  gratify  it.  If  a  person  feels  a 
want,  as  hunger  or  thirst,  it  causes  pain ;  and  if 
he  has  not  the  means  at  hand  to  satisfy  it,  the 
want  impels  him  to  undergo  the  sacrifice  neces- 
sary to  obtain  the  requisite  supply.  This  sacrifice 
also  causes  pain.  By  labor  a  man  is  said  to  lay 
down  a  part  of  his  ease,  liberty,  and  happiness ; 
by  outlay  he  parts  with  what  cost  him  something  to 
acquire,  and  deprives  himself  of  the  benefit  which 
he  might  otherwise  obtain  from  it.  Every  sen- 
sible person  usually  considers  how  great  a  sacrifice 
he  must  make  in  order  to  gratify  his  various 
wants,  and  as  the  price  which  he  must  pay  seems 
to  him  to  be  greater  or  less  than  its  reward  he  acts 
accordingly. 

The  sensations  produced  by  a  want,  by  its 
gratification,  and  by  the  cost  of  appeasing  it,  are 
not  the  same  to  every  person,  for  men  differ  in 
their  mental  and  physical  powers,  natural  and 
acquired  ;  they  differ  not  only  in  ability,  but  in 
their  feelings,  tastes,  and  inclinations.  Even  a 
future  want  renders  an  industrious  and  frugal 
man  nervous  and  unhappy  until  he  has  made 
provision  for  it.  He  anticipates  his  future  wants, 
and  will  not  wait  until  the  spur  of  necessity  is 
actually  applied ;  for  experience  teaches  him  that 


m 


VALUE. 


VALUE, 


ir 


it  requires  time  as  well  as  effort  and  sacrifice  to 
obtain  the  requisite  supply ;  and  he  is  unwilling 
to  rely  on  chance,  charity,  or  theft  to  supply  his 
wants  as  they  occur.  Other  persons  can  not 
restrain  their  desires,  have  no  frugality,  and  live 
in  poverty  because  of  their  wasteful  extravagance. 
Others  regard  labor  as  a  dreadful  sacrifice,  and 
will  suffer  for  want  of  food,  clothing,  and  shelter 
rather  than  undergo  the  great  pain  which  they 
would  suffer  in  order  to  satisfy  their  wants  by 
their  own  industry.  The  Pilgrims  landed  among 
the  rocks  of  New  England  in  December,  1620; 
they  were  assisted  to  migrate,  but  by  1637,  if  not 
earlier,  they  were  taxing  themselves  to  support 
the  poor,  and  afterwards  indulged  in  expensive 
litigation  as  to  which  town  ought  to  support  some 
particular  pauper.  Now  he  travels  not  only  from 
one  town  to  another,  but  from  Maine  to  Oregon, 
having  no  use  for  a  tract  of  wild  land,  unless  for 
the  scenery,  although  offered  as  a  gift.  In  1894 
crowds  of  tramps  seized  railroad  trains  and 
marched  on  Washington,  feeding  on  the  industry 
of  the  country  by  the  way.  At  Chicago,  during 
the  winter  of  1 893-4,  with  bricklayers*  wages  at 
50  cents  an  hour;  carpenters',  35  cents  an  hour; 
common  labor  at  $1.50  to  $1.75  for  an  eight-hour 
day;  patent  flour  at  $4.50  per  barrel;  **  bakers'" 
ditto  at  half  that  price,  and  thousands  of  dram 
shops,  each  paying  a  license  of  $500  per  annum,  the 
Relief  and  Aid  Society  called  upon  the  charitable 
for  about  $2,300  per  day  to  support  the  needy. 


Formerly  a  very  rich  man  said,  the  drunkard  and 
the  glutton  come  to  poverty,  and  sloth  clothes  a 
man  in  rags  and  his  family  also. 

It  is  asserted  that  wealth  would  yield  the 
greatest  amount  of  happiness  if  it  were  equally 
divided;  how  often  a  redivision  would  be  nec- 
essary in  order  to  maintain  the  equality  is  not 
stated.  But  one  might  surmise  that,  if  those 
who  love  industry  and  frugality  the  most  were 
required  to  acquire  the  wealth,  and  those  who 
derive  the  greatest  enjoyment  from  its  consump- 
tion and  who  love  labor  and  frugality  the  least, 
were  employed  as  consumers,  a  much  greater 
sum  of  happiness  might  be  realized.  Heavy  tax- 
ation of  everybody  who  has  anything  renders  this 
scheme  quite  feasible. 

It  is  said  that  "the  real  price  of  everything, 
what  everything  costs  to  the  man  who  wants  to 
acquire  it,  is  the  toil  and  trouble  of  acquiring  it." 
But  neither  this  price  nor  the  value  of  the  thing 
when  acquired  is  the  same  to  everybody.  One 
person  may  want  a  thing  more  than  another, 
acquire  it  for  less,  and  obtain  a  greater  satisfac- 
tion from  it.  The  same  person  does  not  always 
obtain  the  same  thing  at  the  same  cost.  A  hunter 
or  fisherman  would  undergo  the  same  amount  of 
toil  and  trouble  whether  he  killed  or  caught  any- 
thing or  not ;  so  also  with  a  miner  whether  he  dug 
in  rich  or  barren  ground ;  or  a  farmer  whether 
his  crop  was  good  or  poor.  A  person  engaged 
in  any  occupation  after  a  certain  period  of  time 


18 


VALUE. 


would  form  his  opinion  whether  his  total  reward 
compensated  him  for  the  total  sacrifice;  and  what- 
ever was  the  result  he  would  adopt  an  easier  or 
more  lucrative  occupation  if  he  could  find  it.  In 
some  way  satisfactory  to  himself  he  might  strike 
an  average,  and  thereupon  say  that  in  the  ordinary 
state  of  his  health,  strength,  and  spirits,  in  the 
ordinary  exercise  of  his  skill  and  dexterity,  and 
in  the  usual  degree  of  hardship  caused  by  the 
elements,  the  nature  of  the  business  and  other- 
wise, he  obtained  an  average  reward  for  an 
average  sacrifice.  But  the  standard  by  which 
he  measured  and  compared  the  two  would  not 
measure  the  same  amount  of  cost  or  reward  to 
others  who  were  unlike  him,  each  of  whom  would 
have  an  equal  right  to  compare  his  sacrifices  with 
his  enjoyments  and  to  act  accordingly. 

In  the  science  of  political  economy  it  is  assumed 
that  all  men  are  exactly  alike,  or  so  near  alike 
that  any  differences  between  them  may  be  ig- 
nored. This  fallacy  makes  the  science  unsound ; 
the  subject  may  be  thereby  simplified  and  made 
easy  for  new  beginners,  but  the  reasoning  founded 
upon  this  false  assumption  fails  to  apply  to  the 
facts  as  they  exist. 

Adam  Smith  said  that  the  difference  of  natural 
talents  in  different  men  is  in  reality  much  less 
than  we  are  aware  of ;  that  the  difference  between 
a  philosopher  and  a  street  porter,  for  example, 
seems  to  arise,  not  so  much  from  nature  as  from 
habit,  custom,  and  education ;  that  the  two  from 


VALUE. 


19 


nature  are  not  half  so  different  as  a  mastiff  is 
from  a  greyhound,  or  it  from  a  spaniel,  or  this 
last  from  a  shepherd's  dog.    But  since  there  is  a 
material  difference  between  an  idiot  and  a  Sir 
Isaac  Newton,  and  between  a  Samson  and  one 
who  has  the  rickets,  with  gradations  between 
the  two  extremes,  and  a  great  difference  between 
races  or  breeds  of  men,  it  is  immaterial  whether 
the  difference  from  nature  between  men  is  less 
than  It  is  between  dogs.    The  difference  between 
Napoleon  and  the  generals  he  defeated  was  not 
due  to  custom,  habit,  and  education ;  the  differ- 
ence  between  General  Grant  and  other  generals 
who  were  total  failures  was  a  material  and  natural 
aifference. 

A  pereon  of  equal  authority  with  Adam  Smith, 
to  wit  the  Pope,  in  his  encyclical  letter  on  the 
Condition  of  Labor,  says  it  is  impossible  to  reduce 
human  society  to  a  level,  because  there  naturally 
exist  among  mankind  innumerable  differences  of 
the  most  important  kind;  that  people  differ  in 
capability,in  diligence. in  health.and  in  strength 
This  being  manifestly  true,  the  Pope,  by  his  letter 
knocked  the  "  hypothetical  economic  man  "  in  the 

o^v    ^?    r  "''f'^  ^^^^  ^y^*^"  o*  political  econ- 
omy which  IS  founded  on  the  tacit  or  express 

^bhufr  '""^'f  '"^•^  ^'^  exactly  alike,  to  merl 
rubbish  fit  only  for  the  dunghill. 

Among  mankind  there  naturally  exist  all  sorts 

Tu<^  tL'n    i- °^  '""''  ^  ^^^°'  E«^"'  Canaan, 
Judas,  the  prodigal  son.  the  wicked  husbandmen 


20 


VALUE. 


VALUE. 


21 


and  the  idle  servant  who  hid  in  the  earth  the 
talent  entrusted  to  him.  Eternal  happiness  is 
offered  to  all,  but  many  are  unwilling  to  pay  the 
price  for  it. 

Much  ingenuity  has  been  expended  in  devis- 
ing schemes  whereby  everyone  will  suffer  an 
equal  amount  of  sacrifice  for  an  equal  amount  of 
satisfaction.  Instead  of  allowing  everyone  to 
measure  and  compare  the  two  for  himself,  it  is  to 
be  done  for  him ;  he  must  perform  an  allotted  task 
for  an  allotted  reward,  whether  he  is  willing  or 
not.  Socialism  proposes  to  establish  equality 
among  unequal  men  by  reducing  them  to  the 
dead  level  of  slavery.  Society  is  to  be  recon- 
structed ;  personal  liberty  abolished ;  all  land  and 
capital  put  in  the  hands  of  the  managers  of  the 
scheme,  who  will  determine  what  things  are 
**  socially  necessary,"  and  by  their  subalterns  com- 
pel everybody  to  perform  the  task  assigned  to 
him.  The  confiscation  of  all  private  property  is 
the  attractive  bait  held  out  by  those  who  in  the 
grand  social  upheaval  expect  to  be  on  top. 
Robespierre,  Marat,  and  the  Jacobin  Club  pro- 
fessed to  be  great  philanthropists.  The  central 
aim  of  socialism  is  said  to  be  justice.  Ignoring 
the  difference  which  exists  among  men,  sacrifice 
is  to  be  measured  by  a  unit  of  labor  time,  for 
which  everyone  is  to  receive  the  same  wages. 
But  if  an  hour's  labor  in  one  occupation  ought  to 
count  for  more  than  in  another,  the  managers  of 
the  scheme  will  measure  the  difference,  and  not 


every  person  for  himself.  The  things  deemed 
"socially  necessary"  having  been  determined  by 
them,  the  laborers  must  do  the  work  whether 
they  are  willing  or  not,  for  otherwise  society 
would  suffer.  In  a  state  of  freedom,  self  interest 
is  the  goad,  and  every  person  can  prick  himself 
much  or  little ;  in  a  state  of  slavery,  the  master 
and  overseer  apply  the  goad.  Another  method  of 
accomplishing  justice  is  to  compel  the  production 
of  those  things  deemed  "socially  necessary,"  and 
to  divide  the  net  proceeds  among  consumers  in 
proportion  to  their  reasonable  needs,  or  in  pro- 
portion to  consumptive  instead  of  productive 
power,  the  managers  of  the  scheme,  however,  to 
determine  what  are  reasonable  needs.  By  some 
people  freedom  is  highly  esteemed;  but  the 
Israelites,  although  fed  from  heaven,  wept  when 
they  remembered  the  fish,  cucumbers,  melons, 
leeks,  onions,  and  garlic  on  which  they  were  fed 
by  their  masters  in  Egypt. 

If  society  is  to  be  regimented,  and  everybody 
compelled  to  work  under  overseers,  it  would  seem 
to  be  good  economy  to  vest  the  management  of 
the  scheme  in  the  priesthood ;  for  then  every  per- 
son's eternal  and  temporal  welfare  would  be 
secured  by  the  same  piece  of  machinery.  Then 
ever>^one  might  find  a  subsistence  somewhere 
about  the  soup  kitchen  of  the  national  workhouse 
and  at  the  same  time  feel  assured  of  beinj 
at  least  a  small  angel  in  the  world  to  come. 

Although  it  may  be  true,  since  the  Pope  says 


^^ 


ill 


22 


VALUE. 


VALUE. 


23 


so  in  his  letter,  that  in  a  state  of  innocence  every- 
body would  practice  industry  as  their  free  choice 
and  delight,  yet  in  the  present  state  of  depravity 
labor  among  the  thorns  and  thistles  is  unequally 
arduous.  When  labor  became  a  cause  of  sorrow 
it  fell  heaviest  on  ignorance  and  stupidity.  Those 
who  could  do  mental  labor  soon  employed  beasts 
to  perform  physical  toil,  and  thereafter  harnessed 
the  forces  of  inanimate  nature.  These  are  now 
doing  labor  more  and  more ;  mental  labor  causes 
the  senseless  machine  to  become  automatic.  The 
chief  source  of  wealth  is  mental,  not  manual 
labor.  A  social  organism  would  be  a  strange  sort 
of  an  octopus,  all  legs  and  arms,  and  no  head. 


III. 


RELATIVE  VALUE. 

The  essence  of  value  being  satisfaction,  the 
use  values  of  different  things  are  of  the  same 
nature,  and  may  be  compared  with  each  other  as 
to  quantity.  Such  comparison  brings  into  view 
their  relative  use  value.  Commodities  of  a  uni- 
form  grade  or  quality  are  usually  measured  as  to 
their  quantity  by  units  of  number,  length,  area, 
bulk,  weight,  etc.  If  at  any  time  and  place  a  cer- 
tain number  of  units  of  one  commodity  had  an 
equal  value  to  a  person  with  a  certain  other  num- 
ber of  units  of  some  other  commodity  the  ratio 
of  the  relative  value  of  the  two  quantities  to  him 


at  such  time  and  place  would  be  unity;  if  he 
considered  the  two  quantities  to  be  of  equal  value 
to  him,  no  reason  would  exist  why  he  would  pre- 
fer the  one  to  other. 

Relative  value  is  variable.  The  use  value  of 
every  commodity  per  unit  of  quantity  being  vari- 
able, their  relative  value  is  also  variable,  varying 
from  time  to  time  and  from  place  to  place. 

To  the  same  person;  for  if  he  had  more  food 
than  he  could  consume  and  no  clothes,  their  rela- 
tive value  to  him  would  be  different  from  what 
it  would  be  if  he  had  a  superfluity  of  clothes  and 
no  food. 

As  between  different  persons;  for  if  one  were 
hungry  and  the  other  thirsty,  the  relative  value 
of  food  and  drink  would  not  be  the  same  to  each 
of  them ;  at  some  other  time  their  condition  as  to 
the  two  things  might  be  reversed. 


IV. 


EXCHANGE  VALUE. 

When  different  things  are  exchanged  between 
their  respective  owners  such  things  are  said  to 
have  exchange  value. 

The  existence  of  this  quality  depends  upon  a 
difference  in  the  relative  value  of  the  things 
exchanged  to  the  respective  parties  and  their 
right  to  make  the  transfer.  Every  person  esti- 
mates for  himself  the  relative  pressure  of   his 


24 


VALUE. 


VALUE. 


25 


wants  and  the  relative  value  to  him  of  the  means 
necessary  for  their  satisfaction.  Market  value 
is  the  combined  result  of  the  individual  opinions 
of  the  buyers  and  sellers. 

In  every  exchange  each  party  gives  what  he 
considers  to  be  the  comparatively  superfluous  for 
the  comparatively  necessary,  and  expects  to  gain 
in  value  to  him  by  the  exchange ;  for  otherwise 
he  would  act  without  a  motive.  If  a  person  has 
more  of  anything  than  he  requires  for  his  own 
use,  and  is  in  want  of  something  else,  some  of 
the  former  may  well  be  of  less  value  to  him  than 
some  of  the  latter.  By  an  exchange  the  owner 
of  a  thing,  although  it  may  be  a  useless  superflu- 
ity to  him,  can  make  it  worth  to  him  as  much  as 
what  he  can  obtain  in  exchange  for  it ;  how  much 
this  will  be  depends  on  his  trading  capacity  and 
value  sense.  Fraud,  deceit,  a  lack  or  mistake  of 
judgment  may  cause  a  loss  where  a  gain  was 
expected.  A  person  may  pay  too  much  for  his 
whistle,  too  much  for  green  spectacles,  or  even 
sell  his  birthright  for  a  mess  of  pottage.  But 
everyone  who  is  at  all  competent  to  take  care  of 
himself  usually  gains  more  or  less  by  an  ex- 
change. If  he  thinks  a  surplus  m  bushels  of 
grain  are  of  less  value  to  him  than  n  yards  of 
cloth,  he  is  usually  correct  in  his  opinion. 

Neither  party  is  satisfied  with  a  mere  balance 
of  relative  value  to  him,  but  strives  to  g^ve  the 
least  and  get  the  most  possible.  Hence,  an 
exchange  is  usually  preceded  by  a  negotiation, 


during  which  each  party  has  the  benefit  of  the 
other's  opinion  as  to  the  quality  of  the  articles 
and  their  value ;  when  each  party  believes  that 
he  has  reached  the  best  terms  he  can  make  for 
himself,  and  that  he  can  do  no  better  by  dealing 
with  some  other  person,  a  bargain  is  struck  upon 
a  basis  finally  agreed  upon.  It  is  naught,  it  is 
naught,  saith  the  buyer ;  but  when  he  is  gone  his 
way  then  he  boasteth. 

Ratio  of  exchange  is  the  basis  upon  which  an 
exchange  is  made ;  as  if  m  units  of  one  com- 
modity are  exchanged  for  n  units  of  another,  their 
ratio  of  exchange  in  that  transaction  is  ^  or  ™  ;  or, 
a  unit  of  the  former  buys  ^  units  of  the  latter,  and 
a  unit  of  the  latter  buys  ^  units  of  the  former. 
Such  is  the  degree  of  exchange  value,  or  relative 
purchasing  power  of  each  of  the  commodities  in 
the  case  supposed.     In  other  exchanges  of  the 
same    commodities    between    other    persons,  or 
between  the  same   persons  at  another  time  or 
place,  their  ratio  of  exchange  in  large  or  small 
quantities  would   probably  be  ^      Even  if  the 
same  commodities  of  any  certrin  ^rade  or  qual- 
ity  always  exchanged,  at  wholesale  or  retail,  at  a 
certain  ratio,  e.  g.  ^,  the  exchanges  would  not  be 
made  on  the  basis  of  equivalents.     If    neither 
party  gamed  anything,   both  parties  would  act 
^^'ithout    a    motive.     But    the    fact    is,  ratio    of 
exchange  varies  with  the  parties  concerned,  and 
irom  time  to  time  and  from  place  to  place 


26 


VALUE. 


If  an  exchange  were  made  between  A,  the 
owner  of  a  horse,  and  B,  the  owner  of  sheep,  on 
the  basis  of  the  horse  for  twenty  sheep,  such  basis 
would  not  fix  a  ratio  of  exchange  between  all 
horses  and  sheep  as  to  other  persons,  nor  as  to  A 
and  B  even  as  to  the  same  horse  and  sheep  at 
some  other  time  and  place ;  for  then  A  might 
need  or  want  the  horse  more  than  the  sheep,  and 
B  the  sheep  more  than  the  horse.  At  one  time, 
according  to  Shakespeare,  King  Richard  was  in 
great  need  of  a  horse. 

At    an    exchange     as    above    supposed,    the 
bystanders  would  probably  differ  in  their  opin- 
ions as  to  the  relative  value  of  the  animals ;  one 
might  say  that  eighteen  of  the  sheep  were  worth 
as  much  as  the  horse,  and  another  that  the  horse 
was  worth  two  dozen  of  such  sheep.    The  trans- 
action, however,  would  prove  that  A   then  con- 
sidered  the  twenty  sheep  to  be  of  greater  value  to 
him  at   that  time  than  the  horse  ;    and  that  B 
considered  the  horse  to  be  of  greater  value  to  him 
at  that  time  than  the  sheep  ;  both  of  them  might 
be  correct  in  their  opinions.    If  A  would  have 
preferred  nineteen  of  the  sheep  to  the  horse,  and 
B  the  horse  to  twenty-one   sheep,  each  of  them 
would    consider    that   he    had    gained    by   the 

transaction. 

Title  is  the  other  element  which  is  essential  to 
the  existence  of  exchange  value.  An  exchange 
between  two  persons,  neither  of  whom  had  any 
right  to  the  respective  articles  proposed  to  be 


VALUE. 


%7 


exchanged,  nor  power  to  confer  any,  can  not  be 
made,  unless  possibly  between  two  thieves,  who 
might  thereby  transfer  to  each  other  their  respec 
tive  possessory  rights.  Therefore,  if  a  thing  is 
not  property,  it  can  not  have  exchange  value ; 
and  any  such  value  which  might  be  imputed  to  it 
would  be  merely  potential  or  imaginary;  and  any 
reasonmg  about  such  value  would  be  mere  idle 
speculation. 

But  if  a  thing  has  an  owner,  and  it  is  not 
obtamed  from  him  by  robbery,  theft,  or  as  a  gift 
It  becomes  necessary,  in  order  to  induce  him  to 
part  with  it,  to  offer  him  something  which  he  will 
consider  to  be  more  valuable  to  him  in  exchange 
for  It.     Its  acquisition  by  this  method  would  be 
impossible  to  a  person  who  possessed  nothing 
which  the  owner  of  the  coveted  object  would 
accept  in  lieu  of  it.    A  demand  for  anything 
belonging  to  another,  in  order  to  be  effectual 
must  be  backed  up  by  a  supply  of  something 
which  such  other  person  wants  more  than  the 
thing  demanded. 

Property  is  defined  to  be :  That  which  belongs 
exclusively  to  a  person,  that  to  which  he  has  a 
legal  nght,  a  thing  owned  ;  also,  as  the  exclusive 
right  of  possessing,  enjoying,  and  disposing  of  a 
thing ;  ownership.  The  essence  of  property  con- 
sists  of  rights,  although  the  word  is  applied  both 
to  the  thing  and  to  the  right  to  it.  Value  is 
impaired  or  fades  away  if  a  person  is  not  secured 
and  protected  in  his  personal  and  property  rights 


28 


VALUE. 


VALUE, 


29 


In  fact,  rights  are  essential  to  value ;  for  a  thing 
can  not  have  an  actual  use  value  to  a  person 
unless  he  has  a  right  or  power  to  appropriate  it 
in  satisfaction  of  his  wants.  Food  can  not  satisfy 
hunger  unless  there  is  a  right  or  power  to  eat  it ; 
nor  clothing  satisfy  the  need  for  it  unless  there  is 
a  right  to  wear  it.  An  actual  supply  implies  the 
right  or  power  to  make  the  demand  effectual. 

An  owner  has  the  exclusive  right  to  possess, 
enjoy,  and  dispose  of  ^n  object  of  desire  to  the 
extent  of  his  right  to  it.     If  all  such  objects 
belonged  to  nobody,  none  of  them  would  have  any 
exchange  value,  nor  any  actual  use  value  until 
they  were  appropriated  by  some  one.    A  science 
of  wealth  requires  some  assumed  basis  of  personal 
and  property  rights.    Any  system  of  socialism, 
communism,  or  anarchism  must  have  as  its  basis 
a  system  of  personal  and  property  rights  to  cor- 
respond therewith.    What  a  man  shall  have  a 
right  to  do ;  what  shall  be  his  acquisitions,  if  any; 
and  to  what  extent  he  shall  be  protected  in  his 
life,  liberty,  and  property,  are  matters  of  essential 
importance  in  any  inquiry  into  the  nature  and 
causes  of  wealth.    The  word  wealth  is  often  used 
as  synonymous  with  possessions  and  property.  A 
thing,  however,  may  be  property  and  not  wealth ; 
for  if  a  thing  has  lost  its  value  by  use  and  wear, 
or  decay,  it  would  continue  to  be  property  until 
its  owner  saw  fit  to  abandon  it. 

The  fact  that  ownership  is  essential  to  the 
existence  of  exchange  value  affords  an  explana- 


tion of  what  has  been  called  a  paradox.  Adam 
Smith  said :  "  The  things  which  have  the  greatest 
value  in  use  have  frequently  little  or  no  value  in 
exchange  ;  and,  on  the  contrary,  those  which  have 
the  greatest  value  in  exchange  have  little  or  no 
value  in  use.  Nothing  is  more  useful  than  water ; 
but  it  will  purchase  scarce  anything ;  scared  any- 
thing can  be  had  in  exchange  for  it.  A  diamond, 
on  the  contrary,  has  scarce  any  value  in  use ;  but 
a  very  great  quantity  of  other  goods  may  fre- 
quently be  had  in  exchange  for  it." 

Water  running  loose  and  open  to  everybody 

can  not  have  any  exchange  value,  nor  any  use 

value,  until  it  is  appropriated  by  some  one.  When 

water  is  property,  as  a  flow  available  for  irrigation, 

a  water  power,  or  a  city  supply,  it  has  exchange 

value  just  the  same  as  other  property,  the  degree 

of  its  exchange  value  being  dependent  upon  the 

amount  of  its  supply  relative  to  the  demand  for 

it.    In  Chicago,  with  a  vast  body  of  fresh  water 

in  front  of  it,  spring  water  from  Wisconsin  is  sold 

like  other  goods,   it  being  asserted  and  believed 

by  some  that  the  Wisconsin  water  is  purer  than 

the  lake  water.    Various  kinds  of  water  in  barrels 

and  bottles  are  sold  everywhere.    Water,  in  the 

form  of  ice,  is  regularly  sold  at  wholesale  and 

retail.    Ice  formed  on  the  surface  of  a  pond  or  a 

running  stream  is  often  sold  by  the  owner  of  the 

soil    like    any    other    crop.     The    wicked    men 

drowned  in  the  deluge,  and  who  went  to  a  place 

of  torment,  had  reason  to  say  nothing  is  more 


f 


30 


VALUE. 


VALUE. 


31 


11 


injurious  than  water,  except  fire.  If  diamonds 
and  water  are  property,  their  relative  value,  per 
units  of  quantity,  depends  upon  the  same  consid- 
erations as  those  which  apply  to  any  other  kinds 
of  property. 

Measure  of    Wealth.     Everyone  estimates  his 

property  by  its  value  to  him ;  i.  e.,  by  the  benefit 

and  satisfaction  which  he  can  derive  from  it,  or 

obtain  by  means  of  it.     If  he  uses  or  consumes  a 

thing  himself,  its  benefit  is  direct ;  if  he  exchanges 

it  for  something  else,  its  benefit  is  indirect.    The 

value  of  any  superfluity  which  he  may  possess,  or 

of  anything  having  a  less  value  to  him  than  other 

things  which  he  may  need  or  desire,  by  means 

of  an  exchange  is  made  equal  to  the  value  to  him 

of  those  things  which  he  obtains  in  lieu  of  it,  less 

the  cost  of  making  the  exchange.    Commodities 

are  produced  partly,  and  often  entirely,  for  the 

purpose  of   sale,  it  being  only  a  part   of  those 

things  which  one  needs  or  desires  that  he  can,  or 

at  least  does,  produce  himself.    Therefore,  where 

markets  exist  and  sales  are  constantly  made,  it  is 

usual  for  everyone  to  measure  his  wealth  by  its 

purchasing  power,  such  being  the  best  practical 

approximation  to  a  correct  measure  of  its  use  value. 

But  it  has  been  said  that  wealth  is  properly 
measured  by  quantity  of  commodity,  and  not  by 
its  exchange  value  ;  that,  "  a  man  is  rich  or  poor 
according  to  the  abundance  of  necessaries  and 
luxuries  which  he  can  command,  and  whether  the 
exchange  value  of  these  for  money,  com,  or  labor 


be  high  or  low,  they  will  equally  contribute  to  the 
enjoyment  of  their  possessor."  As  to  this  it  may 
be  said  that  if  a  man  had  at  all  times  a  crisp  and 
fresh  stock  of  the  best  quality  of  everything  in 
quantity  sufficient  to  fully  satisfy  all  his  wants,  it 
would  be  immaterial  to  him  whether  his  riches 
had  any  exchange  value  at  all  or  not.  But  not 
having  an  abundance  of  that  kind,  he  would  be 
rich  or  poor  according  to  the  abundance  of  neces- 
saries and  luxuries  which  he  could  command,  and 
the  quantity  of  them  which  he  could  command 
would  depend  upon  the  purchasing  power  of  his 
riches.  If  he  possessed  at  any  time  an  abundance 
of  necessaries  and  luxuries,  such  of  them  as  he 
could  not  use  or  consume  before  they  spoiled  or 
decayed  would  have  no  value  whatever  to  him 
except  to  the  extent  of  their  purchasing  power. 

If  wealth  were  measured  solely  by  quantity 
of  commodity,  and  not  at  all  by  its  exchange 
value,  every  such  quantity  would  measure  the 
same  when  and  where  it  was  a  superfluity  as 
when  and  where  it  was  scarce  and  in  demand.  A 
superabundance  would  be  proportionately  greater 
wealth  than  any  less  amount.  Ever>'  product 
would  measure  as  much  wealth  in  the  hands  of  its 
producer  as  in  those  of  the  consumer.  Wheat  in 
Dakota,  beef  and  pork  in  Kansas,  cotton  in  Ala- 
bama,  cloth  in  New  England,  would  measure  as 
much  wealth  there  as  elsewhere.  Wealth  would 
not  be  increased  by  transporting  goods  from  where 
they  are  not  wanted  to  where  they  are  wanted. 


32 


VAL  UE. 


V. 


II 


MARKET  VALUE. 

rJTf  ^''^'^'  ^'^  ''"''^^^y  ^^^^^^  ^^^  sold,  their 
ratio  of  exchange,  or,  as  it  is  sometimes  called 

their  relative  value,  at  any  time  and  place   is 

ascertainable  only  as  a  deduction  from  the  prices 

at  which  they  are  bought  and  sold  at  such^'me 

whnl/r'   T^  P"^"^'  ^^^^^  ^^^    ^^ount    at 
wholesale  and  another  at  retail. 

The  makers  of  goods,  or  their  first  owners  do 
not  usually  deal  directly  with  each  othrbut  sell 
their  surplus  products  to  dealers  in  them,  and 

retailer.  A  tailor,  shoemaker,  or  other  person 
may  do  custom  work  or  directly  supply  a  local 
or  limited  demand.  But  those  commodities 
which  enter  into  general  consumption,  and  wS 
are  continuously  produced  for  sale,  are  usually 
supplied  to  consumers  after  they  have  passed 
through  the  hands  of  one  or  mLTeaferHn 
them     A  dealer  in  a  commodity  produces  it  at 

l.^n.!!r?i,  P^^'^  ^^^'^    ''  '^  ^^^ted,  and 

wanted  the  most,  or  assists  in  the  procesL     If 

American  farmers  are  ready  to  sell  one  or  two 

millions  of  bushels  of  grain  per  day,  over  eight 

millions  of  bales  of  cotton  within  one  hundred 

days,  as    m    1894,  millions    of   livestock,   vast 

amounts  of    tobacco,  wool,  and  other  products 


VALUE. 


33 


there  must  be  buyers  of  the  stuff  to  hold,  trans- 
port, and  sell  it  to  consumers  at  home  and 
abroad.  The  world's  supply  of  commodities  is 
taken  off  the  hands  of  its  producers  by  the 
traders  and  finally  handed  over  to  the  consumer 
from  time  to  time  as  he  may  want  it,  and  in 
quantity  proportioned  to  his  effectual  demand. 

The  consumer  gains  by  buying  whatever  he 
requires  when  he  wants  it  from  those  who  make 
it  their  business  to  supply  the  consumptive  de- 
mand.    He  lays  in  no  large  stock  of  anything; 
most  commodities  are  bulky,  expensive  to  keep, 
and  more  or  less  perishable ;  e.  g.,  the  daily  news- 
paper soon  loses  its  value.    A  producer  of  any- 
thing intended  to  meet  a  general  demand,  as  cloth 
or  hardware,  can  not  afford  to  retail  his  product 
to  consumers  far  or  near ;  to  do  so  would  inter- 
fere with  his  business,  involve  cost,  and  loss  from 
remnants,  rejected  and  deteriorated  goods.   Their 
wants  are  so  varied  and  capricious  that  the  expe- 
rienced dealer  can  hardly  satisfy  them.    He  deals 
with  as  large  a  number  of  customers  as  possible, 
sets  a  high   price,   at    retail   often    double  the 
wholesale  price,  on  the  newest,  best,  and  most 
desirable  things,  and  as  his  stock  grows  old,  dete- 
riorates    or  fails    to  be    in  demand,  he  finally 
endeavors  to  dispose  of  it  at  or  below  cost  to 
those  who  are  anxious  for  bargains.    The  cus- 
tomer who  wants  the  best,  e.  g.,  eggs  new  laid, 
fresh  butter,  fish  just  caught,  the  choice  qualities 
and  cuts  of  meat,  selected  fruit,  the  best  quality 


u 


VALUE. 


VALUE. 


\\\ 


I 


and  newest  style  of  goods,  must  pay  a  price  to 
correspond.     Any  one  who  is  willing  to  eat  stale 
fish,  fruit,  vegetables,  inferior  qualities  of  meat, 
the  tough  pieces  and  shanks  of  a  carcass,  use  old 
stock  and  poor  qualities  of  anything,  needs  no 
public  warehouse  provided  by  socialism  to  sup- 
ply  him,  for  the  retailer  is  always  anxious  to  sell 
his  old,  decayed,  and  rejected  goods  at  less  than 
cost.    What  a  consumer  wants  is  satisfaction,  of 
which  he  elects  to  be  the  judge  at  the  price  asked 
for  it,  and  the  dealer  endeavors  to  gratify  him. 
A  woman  wants  what  is  in  fashion,  and  what 
will  suit  her  in  style,  make,  color,  and  price.    A 
man  also  wants  what  will  suit  him,  e.  g.,  his 
tobacco  must  be  of  the  right  sort.    Some  one 
might  say  that  tobacco-smoke  drawn  through  a 
cob  pipe  ought  to  answer  the  same  purpose  as  if 
it  were  drawn  through  a  meerschaum  or  a  Ha- 
vana  cigar ;  but  tobacco,  like  other  things,  varies 
in  quality,  and  tastes  differ.   Prison  fare,  a  striped 
suit  of  warm  clothing,  and  eight  hours  of  labor 
or  less  per  day  may  suffice  to  sustain  life  and 
health.    But  happiness  resides  outside  of  prison 
walls  and  any  straight  jacket  invented  by  some 
schemer  to  promote  the  general  felicity.     In  a 
state  of    slavery  or  coercion  a  consumer  must 
take  whatever  his  masters  and  overseers  see  fit 
to  give  him ;  in  a  state  of  freedom  the  supply 
must  conform  to  the  demand.     Producers  and 
dealers  endeavor  to  supply  consumers  with  what 
they  want  when  it  is  wanted,  and  free  competi- 


35 


tion  reduces  the  reward  for  doing  so  to  a  mini- 
mum.  It  is  not  sufficient  for  producers  to  go  on 
mechanically  "  embodying  (so-called)  utilities  in 
material  objects";  for  if  anything  is  produced 
which  is  not  wanted,  or  in  excess  of  the  demand 
for  it,  there  is  no  way  at  present  to  compel 
people  to  consume  it  at  or  below  its  cost. 

A  market  is  a  place  where  commodities  (one  or 
more)  are  continuously,  or  at  stated  times,  offered 
for  sale  and  sold.  Those  who  buy  and  sell  at  any 
place  constitute  the  market  there.  A  city  or 
other  locality  is  a  sufficient  designation  of  the 
place  to  which  a  market  price  refers;  e.  g.,  the 
prices  of  various  commodities  at  London,  Liver- 
pool,  Havre,  Hamburg,  New  York,  etc.,  are  pub- 
lished  daily  in  the  newspapers,  and  otherwise. 

If  those  who  deal  in  one  or  more  things  as- 
semble together  at  one  spot,  as  on  some  board  of 
trade  or  stock  exchange,  and  there  publicly  buy 
and  sell,  any  one  present  and  conversant  with 
the  mode  of  doing  business  there  can  reasonably 
ascertain  the  prices  at  which  articles  are  sold 
there;  in  other  cases  market  prices  are  ascer- 
tained by  inquiry  of  buyers  and  sellers,  or  from 
the  reports  of  sales  published  daily  or  oftener,  and 
which  are  more  or  less  correct,  depending  upon 
the  ability  and  honesty  of  the  reporter.  There 
is  no  such  a  thing  as  a  perfect  market,  where 
every  commodity  is  durable,  uniform  in  quality, 
and  brings  the  same  price  at  the  same  time.  The 
relative  value  of  gold  and  silver  continually  varies, 


36 


VALUE. 


their  relative  value  everywhere  being  fixed  daily 
by  the  London  quotations,  which  are  said  to  be 
made  up  in  the  afternoon  as  an  average  of  the 
dealings  for  that  day  among  the  bullion  dealers. 
If  a  thing  IS  sold  at  auction,  and  for  any  cause  is 
again  put  up  and  resold,  it  rarely  brings  the  same 
price ;  or  if  a  similar  thing  is  offered,  it  will  prob- 
ably  sell  for  less  or  more  than  its  duplicate. 

The  price  of  a  commodity  varies  with  its  qual- 
ity ;  if  the  grade  is  not  uniform  and  the  article 
durable,  it  is  usually  inspected  by  the  buyer,  or  is 
bought  by  sample,  it  being  agreed  that  the  quan. 
tity  bought  shall  conform  to  the  sample.  A  per- 
son  must  be  familiar  with  the  various  kinds  and 
grades  of  a  commodity  and  with  the  mode  of 
dealing  in  it,  in  order  to  act  intelligently  concern- 
mg  It,  or  even  to  understand  the  quotations  of  its 
market  price. 

As  specimens  of  grades  and  quotations  of  mar- 
ket  price  are  the  following :     In  the  Chicago  live- 
stock  market  there  are  numerous  grades  of  cattle, 
the  poorest  selling  for  about  one-third  of  the  best' 
the  price  of  each  grade  varying  with  the  average 
merits  of  the  particular  lot  of  cattle  sold.   In  wool 
of  the  sort  called  "  pulled,"  there  are  about  fifty 
grades,  the  poorest  bringing  about  one-fifth  of 
the  best.     In  the  New  York  and  New  Orleans 
markets  there  are  twenty-two  grades  of  cotton. 
Coffee  may  be,  or  claimed  to  be.  Mocha,  Java,  Rio,' 
Santos,  etc.,   with  various  grades  of  each!     At 
London,  October  7,  1891,  Rio  was  quiet  at  12%q, 


VALUE. 


37 


for  No.  7,  the  reported  visible  supply  of  coffee 
in  Europe  and  America  on  October  i,  1891,  in- 
cluding the  amount  afloat  from  Brazil,  Java,  and 
the  East,  being  2,576,456  bags,  as  against  2,214,544 
bags  ''in  sight"  on  October  i,  1890. 

At  New  York,  March  26,  1895,  sugars  were 
quoted  :  Raws,  quiet  but  firm  ;  Cuba,  Muscovado, 
89  test,  2^.;  molasses  sugars,  89  test,  2^^.\  cen- 
trifugals, 96  test,  3c.;  refined,  quiet  but  firm  on  the 
basis  of  3-ff04i^c.  for  granulated :  at  Liverpool 
same  date,  American  wheat.  No.  2  red  winter, 
4s.  8d.;  No.  2  spring,  5s.  2j^d.;  No.  i  California, 
5s.,  with  a  difference  between  "spot"  and 
"futures";  beef,  extra  India  mess,  70s.;  prime 
mess,  60s.;  pork,  prime  mess,  57s.  6d.;  medium, 
52s.  6d.;  butter,  finest  United  States,  55s.;  good,  50s. 

At  London,  during  the  season  of  1889-90,  the 
bank  rate  for  money  varied  between  the  extreme 
limits  of  3  and  6  per  cent;  English  wheat 
(farmers'  deliveries),  between  29s.  id.  and  36s.  6d. 
per  quarter  ;  cotton  (mid.  Or.),  between  5^J^6fJd. 
per  lb.  During  the  season  of  1890-91  the  bank 
rate  varied  between  2>^@6  per  cent;  wheat 
(farmers*  deliveries),  between  31s.  and  41s.  4d.; 
cotton  (mid.  Or.),  between  4^  and  54^.  Cargoes 
"off  the  coast"  of  California  wheat,  between 
38s.  6d.  and  47s.;  ditto  "  shipping  and  shipped," 
between  37s.  and  46s.  6d.;  Calcutta  No.  2  club, 
between  34s.  and  41s.  9d.  At  Liverpool,  during 
1 89 1,  bacon  (long,  short,  and  clear)  varied  between 
the  extreme  limits  of  25s.  6d.  and  45s.  per  112  lbs.; 


38 


VALUE. 


VALUE. 


39 


Cumberland  cut,  between  24s.  6d.  and  53s.;  cured 
salt  hams,  between  35s.  and  56s.;  lard,  per  100  lbs 
between  29s.  6d.  and  36s.  6d.    At  Chicago  No.  2 
spring  wheat  varied,  during   1888,  between  the 
extreme  limits  of  $1.16^  and  72%q.  per  bushel  • 
durmg  1889,  between  $1.07 and  7514c.;  during  1890' 
between  $1.10  and  70c.    Early  in  the  summer  of 
1 89 1,  on  report  of  short  crops  abroad,  the  price  of 
No.  2  spring  wheat  at  Chicago  was  advanced  from 
about  85c.  to  about  $1.1 6  per  bushel.   But  soon  after 
harvest  the  farmers  sold  wheat  at  the  rate  of  one 
and  one-half  millions  of  bushels  per  day,  and  later 
at  the  rate  of  about  two  millions  of  bushels  per 
day,  whereupon  the  price  sagged  down  to  about 
95c.  m  October  and  80c.  in  April,  1892  ;  the  price 
of  wheat  abroad  failed  to  respond  to  the  higher 
prices.    In  1888,  owing  to  a  short  crop  of  wheat 
m  this  country,  the  price  of  No.  2  red  winter  at 
New  York  was  advanced  from  about  84c.  to  $1  01 
per  bushel,  but  there  were  good  crops  elsewhere 
and  prices  abroad  failed  to  respond.    The  wheat 
crop  of  1894  in  this  country  was  much  below  an 
average,  but  for  want  of  a  foreign  demand  the 
pnce  of  No.  2  spring  at  Chicago  went  below  50c 
per  bushel.    The  world  s  harvest  of  wheat  is  peri 
petual,  being  always  at  hand  somewhere  in  the 
Northern  or  Southern  Hemisphere,  the  annual 
crop  within  the  reach  of  statistics  being  estimated 
at  about  twenty.five  hundred  millions  of  bushels 
as  an  average,  but  its  price  varies  as  above.    On 
September  25,  1891,  at  Chicago  (weather  unsea- 


sonably  hot),  the  market  report  was  :  "  Nearly 
20,000  fresh  and  12,000  stale  cattle  proved  too 
much  for  yesterday's  market,  which  was  flat. 
The  number  was  entirely  too  great,  considering 
the  glutted  condition  of  the  meat  channels. 
There  were  cattle  here  for  which  owners  refused 
$4  (per  100  lbs.)  a  week  ago,  which  could  not  be 
sold  for  over  $3." 

The  price  of  a  commodity  varies  not  only  with 
its  grade  or  quality  and  as  between  different 
buyers  and  sellers  scattered  about  a  market — a 
sharp  seller  selling  for  more  and  a  sharp  buyer 
buying  for  less  than  others— but  also  when  the 
supply  is  in  excess  of  the  demand,  or  the  con- 
trary. If  the  quantity  offered  for  sale  at  any 
price  exceeds  the  demand  for  it  at  such  price,  the 
excess  of  supply  must  remain  unsold  unless  it  is 
crowded  upon  the  market;  e.  g.,  a  perishable 
article,  as  fruit ;  whereupon  competition  among 
sellers  reduces  the  price.  Or,  if  the  quantity 
demanded  at  any  price  exceeds  the  quantity 
offered  at  that  price,  a  part  of  the  demand  must 
remain  unsatisfied,  else  competition  among 
buyers  raises  the  price,  a  rise  in  price  tending 
to  increase  the  supply  and  to  stint  the  demand, 
and  a  fall  in  price  tending  to  increase  the  demand 
and  to  stint  the  supply. 

There  is  a  present  and  also  a  prospective  sup- 
ply. There  is  an  amount  in  the  market  or  on  its 
way  there,  i.  e.,  "  in  sight,"  and  there  is  another 
and  more  uncertain  amount  still  in  producers* 


40 


VALUE, 


hands,  or  available  in  the  future.    More  or  less  of 
a  present  supply  may  be  withheld  by  its  owners, 
depending  upon  their  several  views  as  to  its  pres^ 
ent  as  compared  with  its  future  or  market  value. 
So,  also,  the  demand  varies  according  to  the  several 
views  of  buyers  as  to  the  present  as  compared 
with   the  future  price  of   a  commodity.    Com- 
modities  are  not  hurried  forward  as  fast  as  they 
are  produced  and  crowded  on  the  market,  unless 
they  are  perishable  or  their  market  price  is  very 
attractive ;  nor  do  buyers  rush  in  greedily  unless 
their  wants  are  very  pressing  or  the  price  is 
abnormally  low.     Every  producer  or  owner  of  a 
commodity  consults  his  own  interest  and  con- 
venience  as  to  when  and  where  he  will  dispose  of 
It,  and  every  buyer  acts  in  like  manner  on  his 
own  behalf.    Every  seller  endeavors  to  sell  at  the 
highest  price,  and  every  buyer  to  buy  at  the 
lowest.     The  greater  part  of    a  year's  surplus 
product  IS  usually  marketed  during  the  year.    A 
great  variety  of  causes  affect  market  price  — the 
durability  of  an  article,  the  cost  of  its  keep  the 
amount  -in  sight,"  the  amount  not  in  sight' but 
available  in  the  future,  comers,  strikes,  war,  a  tight 
or  easy  money  market,  changes  in  taxes,  tariffs,  etc. 
The  variation  of  market  price  is  a  source  of 
profit  and  loss.    Any  one  who  can  foretell  the 
price  of  stocks,  grain,  cotton,  etc.,  has  no  need  of 
the  ring  and  lamp  of  Aladdin.     Every  buyer  or 
seller  who  waits  is  a  speculator,  and  there  are 
also  dealers  who  seek  their  fortunes  in  a  practical 


VALUE. 


41 


study  of  what  is  called  the  law  of  supply  and 
demand,  but  who,  in  spite  of  all  the  light  which 
has  been  shed  upon  that  subject,  continually  differ 
in  their  opinions.  The  "  bull"  thinks  the  price  of 
an  article  is  too  low,  and  is  a  buyer.  The  honest 
farmer  or  other  producer  wants  the  market  well 
stocked  with  bulls.  The  "  bear  "  has  a  contrary 
opinion  and  is  a  seller.  Consumers  regard  bears 
with  favor.  The  bulls  and  bears  buy  and  sell  for 
cash  and  also  for  future  delivery.  Sometimes 
one  side  corners  the  other,  but  such  events  are 
usually  local  and  short-lived.  Their  operations 
give  precision  and  publicity  to  market  price.  By 
their  assistance  everyone  can  reasonably  ascer- 
tain from  the  market  reports  published  daily  or 
oftener  the  current  price  of  any  staple  commodity 
for  present  or  future  delivery,  and  can  sell  or  buy 
"spot"  or  "futures"  at  or  about  the  price  then 
current.  Formerly  the  farmer  wagoned  his  grain 
to  Chicago,  finding  on  arrival  the  price  quite 
indefinite,  buyers  indifferent,  and  liable  finally  to 
be  compelled  to  exchange  his  product  for  gro- 
ceries or  store  goods  on  some  basis  fixed  by  the 
other  party,  who  might  perhaps  sweeten  the  bar- 
ter by  paying  some  small  sum  in  cash.  Now  a 
producer  or  owner  can  sell  grain  ahead  by  the 
thousand  or  hundred  thousand  bushels  and  de- 
liver it  afterward  for  cash  on  delivery. 

The  price  of  anything  is  no  exact  sum  in  a 
market  unless  fixed  by  law,  or  the  article  is  a 
monopoly  so  that  its  price  can  be  fixed  by  the 


I 


42 


VALUE. 


VAL  UE. 


43 


seller,  or  is  sold  at  auction,  in  which  case  each 
parcel  sold  has  a  price  of  its  own.     The  one-price 
store  always  has  a  bargain  counter,  and  the  one 
price  is  not  immutable.  As  above  cited,  on  March 
5,  1895,  at  New  York,  ''refined  sugar  was  quiet 
but  firm  on  the  basis  of  sfjc.  to  4i^c.  for  granu- 
lated."   The  difference  between  these  two  prices 
on  100  tons  would  be  $1,125.    Tables  of  market 
prices  which  purport  to  give  the  prices  per  day, 
month,  or  year,  of  commodities,  more  or  less  vari- 
able  in  quality,  are  evidently  made  up  on  some 
system  of  averages.    But  in  the  market  nobody 
buys  or  sells  at  any  average  price.    Where  trans- 
actions are  large  there  is  a  material  gain  or  loss 
at  some  of  the  prices  from  which  the  average  is 
made  up.    A  miller  who  makes  10,000  barrels  of 
flour  per  day,  may  buy  i  ,000,000  bushels  of  wheat 
at  one  time;  the  difference  of  a  cent  a  bushel 
makes  a  difference  of  $10,000  in  the  price  paid. 
A  cent  a  bushel  makes  a  difference  in  the  price 
of  an  average  crop  of  wheat  in  this  country  of 
about  $5,000,000.     Its  price  often  varies  from  i  to 
5  cents  a  bushel  in  a  day,  and  during  a  year  may 
vary  30  or  40   cents  a  bushel  as  between  the 
highest  and  lowest  price. 

Cost  and  Market  Value,  Since  the  price  of  a 
commodity  varies  with  the  supply  relative  to  the 
demand  for  it,  and  the  cost  of  its  production 
affects  the  former  and  the  cost  of  its  acquisition 
the  latter,  these  two  causes  constantly  tend  to 
keep  its  price  within  certain  extreme  limits. 


There  is  a  minimum  below  which  the  market 
price  of  anything  can  not  continue  without  finally 
cutting  off  its  supply.  Those  who  produce  it  at  a 
loss  must  quit  when  they  have  exhausted  their 
capital  and  credit,  and  those  who  can  do  better  at 
something  else  will  quit  voluntarily,  for  in  such 
case  the  market  price  of  the  article  is  below  its 
cost  of  production  to  each  of  them.  But  before  its 
production  finally  ceases,  unless  the  article  is 
superseded  by  something  better  or  more  desira- 
ble, goes  out  of  fashion,  or  for  some  cause  is  not 
wanted,  its  supply  finally  becomes  inadequate  to 
the  demand,  and  its  price  rises.  As  its  price  rises 
the  reward  for  its  production  increases,  which 
stimulates  its  producers  to  increased  activity,  and 
induces  others  who  can  do  so  to  aid  in  increasing 
its  supply,  unless  there  is  a  general  rise  in  prices 
consequent  upon  an  inflation  of  the  currency,  or 
other  cause.  But  there  is  also  a  limit  to  the  price 
of  any  product  as  compared  with  other  things; 
for  as  its  price  increases,  its  consumption  cost  also 
increases,  which  stints  the  demand  more  and  more 
until  such  demand  must  finally  become  nominal. 
But  before  reaching  that  point  the  supply  becomes 
in  excess  of  the  demand  for  it,  and  its  price 
declines  until  finally  the  supply  again  becomes 
inadequate  from  a  decrease  in  its  amount  and  an 
increase  in  the  demand  for  it. 

An  effectual  demand  consists  of  a  want  coupled 
with  a  disposition  and  ability  to  gratify  it.  There 
is  a  limit  to  the  quantity  wanted  of  anything. 


44 


VALUE. 


VALUE. 


45 


although  it  can  be  had  for  nothing.    A  person 
drinks  water  until  his  thirst  is  quenched  and  then 
stops ;  he  wants  no  deluge  for  any  purpose.     If  a 
thing  must  be  bought,  the  cost  of  its  acquisition 
narrows  up  the  extent  of  the  demand  for  it.    Such 
cost  to  everyone  is  the  production  cost  to  him  of 
what  he  gives  in  exchange  for  the  thing  bought. 
No  one  can  continue  to  buy  more  than  his  revenue 
will  purchase,  and  however  he  may  distribute  it  in 
gratifying  his  various  wants,  there  is  a  limit  to  his 
eflfectual  demand  for  every  commodity,  the  aggre- 
gate of  which  several  demands  constitute  the  total 
demand  for  it.    As  the  price  of  anything  rises, 
the  ordinary  consumer  uses  the  article  less  freely; 
he  economizes,  or  buys  other  relatively  less  costly 
and  more  desirable  things.    If  pressed  he  will  use 
inferior  qualities  of  the  same  commodity;   one 
kind  of  food,  drink,  or  clothing  instead  of  another. 
During  the  Irish  famine,  Indian  corn  was  used  as 
a  substitute  for  potatoes ;  other  textiles  were  used 
abroad  in  lieu  of  cotton  during  the  late  Civil  War. 
Great  loss  was  suffered  at  Chicago  in  a  corner  on 
pork  because  the  consumptive  demand  refused  to 
respond  to  the  high  price  set  on  the  article  by 
those  who  engrossed  the  whole  supply  until  it 
became  too  heavy  for  them  to  carry.     Such  also 
was  the  result  of  an  attempt  made  a  few  years 
ago  to  engross  the  entire  world's  supply  of  copper. 
Commodities  are  produced  in  such  variety  that  no 
one  is  ordinarily  compelled  to  buy  any  one  of 
them.    There  is  other  meat  besides  pork,  and 


other  metals  besides  copper.  A  person  can  wear 
woolen,  linen,  or  cotton  goods ;  drink  beer  instead 
of  whisky ;  tea,  cocoa,  or  chicory  instead  of  coffee ; 
eat  Indian  corn,  rye,  oats,  etc.,  instead  of  wheat,' 
and  wheat  instead  of  com  or  potatoes  when 
bakers'  flour  is  $2  and  patent  flour  $3.20  per  bar- 
rel,  wheat  (No.  2  spring)  54  cents,  corn  57  cents, 
and  potatoes  70  cents  per  bushel,  as  they  were  at 
Chicago  in  September,  1894. 

While  the  extent  of  the  demand  for  a  thing  is 
affected  by  its  cost  to  the  consumer,  and  also  by 
the  cost  of  its  substitutes,  yet  the  demand  for  it 
is  greatly  aided  by  an  established  taste  for  it. 
Many  will  continue  to  -consume  corn  or  potatoes, 
although  wheat  is  cheaper.     A  preference  abroad 
for  other  grain,  in  fact  less  nutritious,  materially 
limits  the  foreign  demand  for  Indian  corn.   When 
the  tax  on  distilled  spirits  raised  the  price  of 
whisky  from  15  cents  a  gallon  to  $1.15  or  more, 
the  quantity  wanted  was   not   reduced    propor- 
tionally ;  so  also  as  to  beer  and  tobacco.    On  the 
other  hand  the  stress  of  a  want,  as  compared 
with  other  wants,  varies  from  a  desire  for  vari- 
ety, or  a  change  of  fashion,  custom,  and  habits. 
Boots  and  stovepipe  hats  are  little  worn ;  snuff 
has  almost  gone  out  of  use ;  broad-toed  shoes  are 
not  wanted. 

Free  competition  in  the  production  and  sale  of 
commodities  is  the  only  method  of  fixing  their 
price  in  which  all  parties  can  concur.  Either  the 
producer  or  consumer  will  object  to  any  price 


46 


VALUE. 


fixed  by  law,  and  to  all  combinations  entered  into 
in  order  to  raise  or  lower  the  price  of  anything 
or  to  monopolize  its  production.     It  is  proper  by 
law  to  punish  and  prevent  the  sale  of  unwhole- 
some commodities,  adulteration,  fraud,  deceit,  and 
all  boycotts  and  other  combinations  to  oppress 
anyone  m  the  exercise  of   his  just  and  lawful 
rights,  leaving  him  free  to  decide  what,  if  any- 
thing,  he  will  produce  for  sale,  when,  where,  and 
at  what  price  he  will  sell  his  product  —  those 
covered  by  patent,  copyright,  trademark,  or  other 
legitimate  monopoly  excepted  —  and  also  free  to 
buy  anything  which  may  be  lawfully  offered  for 
sale,  when,  where,  and  at  any  price  which  he 
may  see  fit  to  give  for  it.    Every  person  engaged 
m  an  occupation  might  desire  to  have  his  product 
or  business  a  monopoly,  but  if  the  price  of  every- 
thing  could  be  doubled  their  relative  value  would 
remain  the  same.    Therefore,  every  trade  union 
trust,  pool,  syndicate,  etc.,  ought  to  insist  that  in 
every  business,  except  their  own,  there  should 
be  no  monopoly  whatever. 

Under  ancient  class  legislation  a  baker  in  Lon- 
don was  convicted  by  a  jury  of  consumers  and 
pilloried  because  he  bought  two  quarters  (i6  bu  ) 
of  wheat,  then  exposed  for  sale  in  the  common 
market  on  the  pavement  within  Newgate,  at  1 5  >^d 
per  bushel,  being  2>^d.  over  the  common  selling 
price  at  that  time  in  that  market,  "to  the  great 
loss  and  deceit  of  the  common  people  and  to  the 
increase  of  the  dearness  of  corn."  Now  the  wheat 


VAL  UE. 


47 


might  have  been  of  superior  quality,  or  of  a  dry  sort 
which  would  absorb  more  water  in  the  dough,  or 
take  less  alum  in  order  to  make  the  regulation 
loaf.  Formerly  famines  were  frequent  in  Eng- 
land,  there  being  fifty-seven  in  that  country  dur- 
ing  the  eleventh  century,  according  to  Mulhall. 

It  being  reported,  during  the  winter  of  1894-5, 
that  two  pounds  of  bread  were  sold  in  New  York 
for  5  cents,  it  was  proposed  to  compel  the  Chi- 
cago  bakers  to  do  the  same.  The  city  having  no 
authority  to  fix  prices,  some  Solon  introduced 
a  bill  m  the  Legislature  for  the  desired  purpose. 
At  that  time  everyone  could,  if  he  chose  to  do  so 
bake  his  own  bread,  and  perhaps  also  bake  bread 
for  sale,  and  sell  two  pounds  or  more  for  5  cents 
unless  he  feared  injury  as  a  "scab"  from  some 
bakers'  union. 

In  1670  a  bill  was  passed  by  one  branch  of  the 
General  Court  of  Massachusetts,  but  not  con- 
curred  in  by  the  other,  reciting :  "  This  court 
considering  the  great  difficulty  and  discourage- 
ment  that  at  present  lies  pressing  upon  many 
inhabitants  of  this  jurisdiction,  especially  upon 
such  whose  callings  are  in  husbandry,  not  only 
by  reason  of  the  afflicting  hand  of  God  upon  them 
several  years  in  blasting  their  principal  grain,  and 
abating  their  increase  in  other  corn,  and  slowness 
of  market,  and  exceeding  low  price  for  what  the 
husbandman  can  raise  — unto  whose  afflicting 
hand  all  ought  to  submit  and  humble  themselves 
and  yet  with  the  prophet  confess,  *  Thou,  Lord' 


48 


VALUE, 


t 


hath  afflicted  us  less  than  we  deserve,'— but  also 
difficulty  and  discouragement  are  yet  heaped  and 
increasing  upon  them  and  others  by  reason  of  the 
excessive  dearness  of  labor  by  artificers,  laborers, 
and  servants,  contrary  to  reason  and  equity,  to 
the  great  prejudice  of  many  householders  and 
their  families,  and  tending  to  their  utter  ruin  and 
undoing  —  and  the'  produce  thereof  is  by  many 
spent  to  maintain  such  bravery  in  apparel  which 
is  altogether  unbecoming  their  place  and  rank, 
and  in  idleness  of  life,  and  a  great  part  spent 
viciously  in  taverns  and  alehouses,  and    other 
sinful  practices,  much  to  the  dishonor  of  God, 
scandal  of  religion,  and  great  offense  and  grief  to 
sober  and  godly  people  amongst  us,  all  of  which 
timely  to  prevent,  etc.,"  thereupon  proceeding  to 
fix  wages,  payable  in  corn  at  the  price  from  year 
to  year  set  by  the  General  Court,  and  providing 
penalties  for  the  breach  of  its  provisions.    The 
modem  Pecksniff  entertains  quite  opposite  views, 
and  favors  an  '*  afflicting  hand  "  manifested  in 
the  form  of    boycott,    intimidation,    force,  and 
violence   done   to   scabs,  employers,   and    their 
property. 

Every  person,  who  is  free  to  do  so,  in  order  to 
obtain  a  livelihood  or  a  profit,  selects  from  those 
occupations  which  are  open  to  his  choice,  the  one 
which  appears  to  him  to  offer  the  best  reward  for 
the  same  cost  to  him.  All  employments  are  kept 
filled  by  each  one  of  the  rising  generation  and 
others  in  search  of  a  livelihood  or  profit,  amount- 


VALUE. 


49 


mg  m  this  country  to  a  million  or  more  annually 
exercismg  his  power  of  choice,  and  adopting  with 
or  without  the  assistance  of  friends,  the  occupa- 
tion which  appears  to  be  best  suited  to  his  means 
capacity,    inclination,     and    previous    training' 
What  reward  will  be  deemed  adequate  in  any  occu- 
pation  which  is  or  seems  to  be  arduous,  hazardous 
unwholesome,  discreditable,  dirty,  or  otherwise 
unattractive,    or     the    contrary,    every    person 
decides  for  himself.    Cost  and  its  reward  no  one 
can  measure  and  compare  except  the  person  who 
undergoes  the  one  and  enjoys   the  other.    For 
example,  no  one  can  estimate  the  sacrifice  made 
by  a  smith  in  shoeing  a  horse  except  himself     It 
probably  costs  one  smith  more  than  another  to 
shoe  the  same  horse  equally  well,  and  the  price 
paid  for  the  job  may  afford  him  less  satisfaction 
But  if  both  smiths  continued  to  shoe  horses,  the 
fair  inference  would  be  that  each  of  them  con- 
sidered  his  reward  to  be  worth  its  cost  to  him 
and  to  be  at  least  equal  to  any  reward  which  he 
could  otherwise  obtain  at  the  same  cost  to  him 
Some  fail  to  find  any  industrial  pursuit  which 
offers  to  them  a  sufficiently  attractive  reward 
Darwin,  during  his  vojrage  round  the  world,  asked 
two  beggars  in  Chili   why  they  did  not  work? 
One  gravely  answered  that  the  days  were  too 
long,  and  the  other  said  he  was  too  poor. 

Among  the  great  variety  of  employments 
there  are  places  suited  to  every  degree  of 
capacity ;  and  everyone  is  rewarded  according  to 


50 


VALUE, 


his  ability  and  good  fortune.  Every  common 
sailor  is  not  competent  to  command  the  ship, 
nor  every  common  soldier  to  command  the  army, 
nor  every  railroad  employe  to  be  its  manager, 
nor  every  wage  laborer  to  take  the  place  of  his 
employer.  With  equal  opportunities  unequal 
men  achieve  unequal  success.  Some  fail  from  ill 
health  or  other  misfortune,  but  more  fail  from 
incapacity,  ignorance,  indolence,  extravagance, 
drunkenness,  dishonesty,  and  bad  habits.  In  the 
same  employment  one  person  is  much  sought 
after  by  customers,  employers,  and  clients,  while 
another  gains  only  a  meager  subsistence  or  fails 
entirely.  The  diligent,  skillful,  able,  and  honest 
man  is  always  busy,  while  others  are  out  of  a  job 
and  apply  for  work  to  him,  for  which  they 
demand  high  wages,  whether  they  are  indolent, 
unskillful,  dishonest,  drunk,  or  sober.  In  one 
case  a  journeyman  tailor  employed  to  make  up  a 
coat,  in  order  to  finish  his  job  easier  and  sooner, 
cut  off  part  of  the  pattern  and  spoilt  the  coat.  Such 
a  tailor  fails  even  as  a  journeyman.  Employers 
are  not  an  hereditary  race ;  the  most  successful 
men  usually  start  poor  and  rise  to  position  and 
affluence  by  their  own  merits  and  against  all 
obstacles.  The  rich  Carnegie  says  his  father  was 
a  poor  Scotch  weaver,  and  his  wealth  was  not  due 
solely  either  to  good  luck  or  oatmeal.  The 
master  workman  of  the  Knights  of  Labor 
was  paid  $5,000  per  annum  for  his  services, 
while  the  Sir  Knights,  who  voluntarily  footed 


VALUE. 


51 


all  the  bills,  received  for  their  labor  $2,  more 
or  less,  per  day. 

The  office  of  President  was  held  successively 
by  a  rail-splitter  and  a  tailor,  while  the  Union 
hosts  were  led  to  victory  by  the  son  of  a  tanner. 
Others  led  their  armies  to  defeat. 

Under     free    competition    every    competitor 
endeavors  to  adopt  the  occupation,  lying  within 
his  power  of  choice,  which  will  afford  him,  on  a 
reasonable  average  and  according  to  his  standards 
and  opinion  in  the  matter,  the  best  reward  at  the 
same  cost  to  him.    And  supposing  every  compet- 
itor to  have  accomplished  his  purpose,  then  no  one 
would  have  any  motive  to  change  his  occupation, 
and  the  relative  value  of  commodities  would  be  in 
equilibrium.     But  even  if  nobody  died  and  there 
was  no  rising  generation  or  other  newcomers, 
yet  if  the  production  or  consumption  of  commod- 
ities varied  relatively,  the  equilibrium  would  be  at 
an  end ;  the  supply  of  some  things  would  be  in 
excess  and  of  others  deficient,  and  a  redistribu- 
tion of  industry  would  be  required.    But  one  gen- 
eration is  continually  dying  out  and  another  suc- 
ceeding having  different  capacities,  tastes,  and 
desires,  too  many  of  whom  adopt  some  pursuits 
and  too  few  others,  while  many  of   those  who 
have  already  made  their  choice  fail  of  success  in 
it  or    become    dissatisfied    with    their    lot    and 
endeavor  to  better  themselves  by  a  change.    Very 
few    people    consider     themselves     adequately 
rewarded  for  their  merits  and  sacrifices.    Also 


I 


52 


VALUE. 


new  industries  arise  —  e.  g.,  electric  appliances  — 
new  wants  and  new  means  to  satisfy  them ;  new 
uses  are  found  for  things,  e.  g.,  cotton  seed,  rock 
oil,  coal  tar,  gas,  animal  fat,  etc.;  and  new  modes 
of  conducting  old  industries  by  improved  methods 
and  machinery. 


VI. 


NATURAL  VALUE. 

Free  competition  implies  the  right  of  every 
competitor  to  estimate  and  compare  cost  and  its 
reward  for  himself;  and,  therefore,  if  everyone 
of  them  were,  in  his  opinion,  as  well  rewarded  in 
his  occupation  as  he  would  be  in  any  other  within 
his  power  of  choice,  competition  would  have  spent 
its  force,  and  the  relative  value  of  commodities 
would  be  in  equilibrium,  although  the  cost  of  each 
of  them  to  each  of  its  producers  was  not  the  same. 
But  the  relative  value  of  commodities  has  been 
called  natural,  or  normal,  when  they  exchange  for 
each  other  on  the  basis  of  equivalents  in  cost, 
i.  e.,  when  the  cost  of  their  acquisition  is  equal  to 
the  cost  of  their  production.  In  order  to  present 
natural  value  in  a  definite  form,  suppose  — 

c=a  unit  of  cost, 

x.c=cost  per  unit  of  commodity  *'  a," 


y.c: 


t( 


n 


n 


<« 


"b," 


and  that  m  units  of  "a"  cost  each  of  its  producers 
the  same  to  produce  them  as  n  units  of  "  b  "  cost 


VALUE. 


53 


each  of  its  producers,  then,  at  their  so-called 
natural  or  normal  value. 

m.x.c=n.y.c,  or  ^=^,  (i) 

it  being  asserted  that  under  free  competition  - 
regulates  and  determines  ^ ;  it  being  also  assumed, 
contrary  to  the  facts,  that  every  commodity  is 
uniform  in  quality,  and  that  all  men  are  exactly 
alike. 

If  m  units  of  "  a  "  and  n  units  of  "  b  "  have  the 
same  market  value,  what  is  c  or  a  unit  of  cost 
whereby  it  may  be  known  whether  or  not  their 
cost  is  the  same  ?  According  to  great  authority, 
a  unit  of  cost  consists  of  *'  a  quantity  of  labor,"  it 
being  said  (Ricardo,  Chap,  i,  Sec.  i)  "that  this  is 
really  the  foundation  of  the  exchangeable  value 
of  all  things  excepting  those  which  can  not  be 
increased  by  human  industry  is  a  doctrine  of  the 
utmost  importance  in  political  economy."  The 
doctrine  of  natural  value  being  of  that  importance, 
whatever  c  may  represent,  in  Eq.  (i),  the  subject 
deserves  careful  examination,  beginning  with 
Adam  Smith. 

I.   THE  DEER  AND  BEAVER  CASE. 

Adam  Smith  said  (B.  i,  Chap,  6):  "In  that 
early  and  rude  state  of  society,  which  precedes 
the  accumulation  of  stock  and  the  appropriation  of 
land,  the  quantities  of  labor  necessary  for  acquir- 
ing different  objects  seems  to  be  the  only  circum- 
stance which  can  afford  any  rule  for  exchanging 


54 


VALUE. 


them  for  one  another.  If  among  a  nation  of  hunt- 
ers, for  example,  it  usually  cost  twice  the  labor  to 
kill  a  beaver  which  it  cost  to  kill  a  deer,  one  beaver 
would  naturally  exchange  for  or  be  worth  two 
deer.  It  is  natural  that  what  is  the  produce  of 
two  days'  or  two  hours'  labor  should  be  worth 
double  of  what  is  usually  the  produce  of  one 
day's  or  one  hour's  labor." 

Here  cost  consists  of  labor,  and  is  measured  by 
a  unit  of  labor  time,  viz. ,  a  day's  or  an  hour's  labor, 
which  is  supposed  to  be  the  same  sacrifice  to 
every  hunter,  and  to  procure  the  same  amount  of 
deer  or  beaver,  whether  one  hunter  undergoes 
the  labor  or  another. 

But  if  it  cost  a  hunter  twice  the  labor  to  kill  a 
beaver  as  it  cost  him  to  kill  a  deer,  what  motive 
would  induce  him  to  kill  deer  for  the  purpose  of 
exchanging    them   for  beaver?    He  would   not 
undergo  the  cost  of   killing  two  deer  and  the 
additional  cost  of  making  the  exchange,  and  take 
the  chances  of  doing  so,  when  he  could  kill  a 
beaver  at  the  same  cost  as  to  kill  two  deer.     No 
person,  savage  or  civilized,  will  produce,  or  con- 
tinue to  produce,  anything  for  sale  or  exchange 
unless  he    can  save  in  cost  by  the  exchange. 
Adam  Smith  says  (B.  i,  Chap.  2):    "  In  a  tribe  of 
hunters  or  shepherds  a  particular  person  makes 
bows  and  arrows,  for  example,  with  more  readi- 
ness   and    dexterity  than    any  other.     He    fre- 
quently exchanges  them  for  cattle  or  for  venison 
with  his  companions,  and  finds  at  last  that  he  can 


VALUE. 


55 


in  this  manner  get  more  cattle  and  venison  than 
if  he  went  to  the  field  to  catch  them."  To  this  it 
may  be  added  that  his  companions  gave  cattle 
and  venison  for  bows  and  arrows  because  they 
thereby  obtained  the  latter  at  a  less  cost  to 
them  than  if  they  made  them  for  themselves. 
Everybody  could  not,  nor  can,  make  an  arrow  or 
spearhead  out  of  a  piece  of  brittle  flint,  nor  other 
stone  implements,  many  of  which,  and  wampun, 
also,  were  made  with  such  art  that  they  excite 
wonder  how  the  work  was  done  with  wooden  or 
stone  implements.  It  may  be  safely  asserted, 
therefore,  under  color  of  great  authority,  that 
cattle  and  venison  were  exchanged  for  bows  and 
arrows,  and  deer  for  beaver,  because  each  party 
saved  in  cost  to  him  by  the  exchange,  to  which 
may  be  added  that  he  also  gained  in  value; 
for  if  the  bows  and  arrows  were  of  greater 
value  to  their  maker  than  the  cattle  or  ven- 
ison offered  for  them,  he  would  refuse  to  make 
the  exchange. 

Suppose  it  cost  A  as  much  to  produce  a  unit  of 
commodity  **c"  as  m  units  of  commodity  "d,"  and 
B  as  much  as  n  units  of  commodity  *'d";  it  is 
required  to  know  the  conditions  on  which  each 
may  save  cost  by  an  exchange. 

If  B  gave  A  n  units  of  "d"  for  (i+x)  units  of 
"c,"  B  would  save  the  cost  to  him  of  producing 
the  X  units;  and  the  (i+x)  units  of  "c"  would 
cost  A  the  same  as  m  (i+x)  units  of  "d."  There- 
fore each  would  save  in  cost  as  follows : 


56 


VALUE. 


(2) 


A,  the  cost  to  him    of  producing  n— m 
(i+x)  units  of  "d,"  or  ^  -  (i+x)  units  of  "c." 

B,  the  cost  to  him  of  producing  n.x  units 
of  "d"  or  X  units  of  **c." 

And  the  conditions  are : 

x>o 

H>i+x  (3) 

which  hold  good,  positively,  if  n>m,  or  if  the 
relative  cost  of  producing  *»d"  as  compared  with 
"c"  is  less  to  B  than  to  A,  although  "c"  costs  A 
more  to  produce  it  per  unit  than  it  does  B.  For  ex- 
ample, suppose  m=2  :  n=4  :  x= >^,  then  each  party 
would  save  the  cost  to  him  of  producing  one-half 
a  unit  of  "c." 

Suppose  there  is  competition  in  the  production 
of  the  two  commodities.  If  A  gave  B  (i+x)  units 
of  "c"  for  n  units  of  "d,"  then  one  unit  of  "c" 
^^ys  TTi  ^nits  of  "d."  But  if  E  offered  ( i  -f-x+h) 
units  of  "c"  for  the  n  units  of  "d,"  B  would  deal 
with  him  unless  A  would  do  the  same.  If  E, 
or  some  other  competitor  of  A,  made  i+x+hJt^ 
the  exchange  value  of  **c"  would  be  below  its  cost 
of  production  to  A,  for  he  would  save  cost  by  pro- 
ducing "d."  Suppose  now  that  F,  competing  with 
B,  offered  (n+k)  units  of  "d"  for  (i+x-f  h)  units 
of  "c,"  then  B  must  do  the  same  or  be  undersold. 
^  !f  ^.^^^  accept  of  a  very  small  saving  per  unit  of 
"d"  in  order  to  make  a  large  saving  by  selling  a 
large  quantity  of  -d."     Finally,  if   F,  or  some 


V 


VALUE. 


67 


other  competitor   of   B,  made  k  large  enough, 
the     result     of     the     competition     might     be 

i  +  x  +  h      I  +  X*  (4) 

In  which  case  both  A  and  B  would  save 
as  much  by  an  exchange  of  their  products  as 
they  did  at  first,  which  would  justify  the  old 
saying  that  it  is  well  for  the  cobbler  to  stick  to 
his  last. 

If  a  person  wants  n,  which  exchanges  in  the 
market  for  m,  and  he  produces  m  and  exchanges 
it  for  n,  it  costs  him  the  same  as  m,  with  the  cost 
of  making  the  exchange  added.  He  may  not  be 
able  to  produce  n  at  all,  or  only  at  great  cost, 
while  another  or  others  can  do  so  at  a  small  cost 
to  them.  Every  one  usually  acquires  any  home  or 
foreign  product  by  way  of  exchange  at  much  less 
than  it  would  cost  him  to  produce  it.  If  this  were 
not  so,  there  would  be  no  motive  to  induce  a  per- 
son to  procure  m  for  the  purpose  of  exchanging 
it  for  n,  or  of  procuring  n  for  the  purpose  of 
exchanging  it  for  m. 

Cost  of  Production,  among  a  nation  of  hunters, 
would  not  be  the  only  circumstance  affecting  the 
exchange  value  of  their  products.  If  it  cost  twice 
as  much  to  kill  a  beaver  as  to  kill  a  deer,  the 
question  would  still  remain,  how  much  of  each 
was  wanted?  If  beaver  were  produced  in  excess 
of  the  demand,  one  of  them  would  not  exchange 
for  two  deer.  This  would  reduce  the  supply  of 
beaver.  Hence,  relative  demand  is  a  regulator  of 
relative  value. 


58 


VALUE, 


I  ^ 


Although  it  may  be  true  that  in  the  same  occu- 
pation  and  to  the  same  person,  usually  or  on  an 
average,  two  days'  or  two  hours'  labor  would  be 
double  the  cost  or  sacrifice  of  one,  yet,  since  men 
are  not  exact  duplicates  of  each  other,  labor  in 
the  same  occupation  for  the  same  period  of  time 
will  not  usually,  or  on  an  average,  amount  to  the 
same  sacrifice,  or  produce  the  same  amount  in 
quantity  or  value.    It  is  quite  obvious  that  an 
alert,  active  hunter,  swift  of  foot,  with  keen  sight 
and  hearing,  would  usually  kill  more  deer  or 
beaver  in  the  same  time  than  a  dull,  sluggish 
hunter,  slow  of  foot,  dim  or  short-sighted  and 
hard  of  hearing ;  also,  the  former  would  probably 
enjoy  the  hunt  and  thereby  lay  down  a  less  quan- 
tity of  ease,  liberty,  and  happiness  than  the  other. 
Also,  men  being  unlike,  some  of  the  hunters 
would  prefer  to  kill  or  trap  beaver  than  to  scour 
the  country  after  deer.  Whereupon,  if  one  hunter 
could  kill  (2+p)  deer  at  the  same  cost  to  him  as 
to  kill  one  beaver,  and  another  hunter  could  cap- 
ture  (i+q)  beaver  at  the  same  cost  to  him  as  to 
kill  two  deer,  each  of  them  would  save  cost  by  an 
exchange  of  two  deer  for  one  beaver.     At  that 
ratio  of  exchange,  every  hunter  who  could,  or 
thought  he  could,  kill  two  deer  at  less  cost  to  him 
than  one  beaver,  would  kill  deer,  and  every  hunter 
who  could,  or  thought  he  could,  kill  a  beaver  at 
less  cost  to  him  than  to  kill  two  deer,  would  kill 
beaver.    In  a  state  of  freedom,  every  person  will 
adopt  the  occupation  lying  within  his  power  of 


VALUE. 


59 


choice  which  will,  in  his  opinion,  afford  him  the 
best  reward  at  the  same  cost  to  him,  and  will 
measure  cost  and  its  reward  for  himself.  There- 
fore, if  among  a  nation  of  hunters  deer  and  beaver 
were  killed  for  the  purpose  of  exchange,  their 
relative  value  would  tend  to  become  such  that 
every  hunter  of  deer  would  acquire  beaver,  and 
every  hunter  of  beaver  would  acquire  deer,  at  less 
cost  to  him  by  way  of  exchange  than  to  procure 
them  directly  for  himself ;  for  otherwise,  a  hunter 
would  alter  his  vocation,  which  he  would  have 
reason  to  do  if  too  many  hunted  deer  or  beaver, 
or  either  of  the  animals  became  more  or  less  dif- 
ficult to  capture,  or  varied  in  quality,  or  the  rel- 
ative demand  for  them  varied. 

The  quantities  p  and  q  would  be  different  to 
the  hunters  because  of  their  inequality,  natural 
and  acquired.  Whatever  the  ratio  of  exchange 
might  be,  the  best  or  most  efficient  hunters  would 
have  more  product  to  consume  and  exchange  than 
their  inferiors.  No  one  of  them  would  receive 
or  be  entitled  to  an  average  reward  unless  he 
were  an  average  hunter ;  for,  according  to  the 
author  cited,  in  the  original  state  of  things  exist- 
ing before  the  advent  of  the  landlord  and  cap- 
italist, the  whole  produce  of  labor  belongs  to  the 
laborer  as  the  natural  recompense  or  wages  of  his 
labor.  But  these  natural  wages,  being  contingent 
on  the  result  of  the  labor,  may  be  very  small. 
For  Adam  Smith  says :  ''  Among  the  savage 
nations  of  hunters  and  fishers,  every  individual, 


60 


VALUE. 


who  is  able  to  work,  is  more  or  less  employed  in 
useful  labor,  and  endeavors  to  provide,  as  well  as 
he  can,  the  necessaries  and  conveniences  of  life 
for  himself  or  for  such  of  his  family  or  tribe  as 
are  either  too  old  or  too  young  or  too  infirm  to 
go  a  hunting  or  fishing.    Such  nations,  however, 
are  so  miserably   poor  that,   from  mere   want! 
they  are   frequently  reduced,   or  at  least  think 
themselves  reduced,  to  the  necessity,  sometimes, 
of  directly  destroying,  and  sometimes  of  abandon' 
ing,  their  infants,  their  old  people,  and   those 
afflicted  with  lingering  diseases,  to  perish  with 
hunger,  or  to  be  devoured  by  wild  beasts."    If, 
as  it  is  asserted,  manual  or  physical  labor  pro^ 
duces  all  the  wealth,   it  seems  strange  that  a 
laborer  who  works  for  hire  should  make  a  better 
living  now,  when  the  landlord  and  capitalist  are 
said  to  share  with  him,  than    he  did  when  he 
directed  his  own  labor  and  shared  with  nobody.   In 
fact,  the  socialist  strives  to  convince  him  that  he 
will  always  live  in  the  midst  of  abundance,  with 
very  little  labor,  when  the  State  is  his  landlord  and 
a  swarm  of  officials  and  overseers  are  his  masters. 
In  the  deer  and  beaver  case,  cost  of  production 
consists  of  labor  and  is  measured  by  a  unit  of 
labor  time,  e.  g.  an  hour's  or  a  day's  labor,  which 
is  there  supposed  to   cost  everyone    the   same 
amount  of  his  ease,  liberty,  and  happiness,  and  to 
produce  in  every  case  the  same  amount  in  quan- 
tity or  value,   all  the  deer  and  also  the  beaver 
bemg  assumed  to  be  of  a  uniform  size  and  quality. 


VALUE. 


61 


But  after  stating  that  case,  Adam  Smith  adds : 
"If  the  one  species  of  labor  should  be  more 
severe  than  the  other,  some  allowance  will 
naturally  be  made  for  this  superior  hardship,  and 
the  produce  of  one  hour's  labor  in  one  way  may 
frequently  exchange  for  that  of  two  hours* 
labor  in  the  other.  Or,  if  one  species  of  labor 
requires  an  uncommon  degree  of  dexterity 
or  ingenuity,  the  esteem  which  other  men 
have  for  such  talents  will  naturally  give  a  value 
to  their  produce  superior  to  what  would  be  due  to 
the  time  employed  about  it.  Such  talents  can 
seldom  be  acquired,  but  in  consequence  of  long 
application,  and  the  superior  value  of  their  pro- 
duce, may  frequently  be  no  more  than  a  reasonable 
compensation  for  the  time  and  labor  which  must 
be  spent  in  acquiring  them.  In  the  advanced  state 
of  society,  allowances  of  this  kind  for  superior 
hardship  and  superior  skill  are  commonly  made 
in  the  wages  of  labor ;  and  something  of  the  same 
kind  must  probably  have  taken  place  in  its  ear- 
liest and  rudest  period." 

In  this  statement  it  is  assumed  that  the  same 
species  of  labor  is  of  equal  hardship  to  everybody. 
But  this  is  not  true.  Among  a  nation  of  hunters, 
one  would  enjoy  the  chase,  and  consider  the  cap- 
ture of  beaver  as  very  dull  and  irksome ;  another 
would  be  of  a  contrary  opinion.  In  the  later 
stages  of  society  some  prefer  to  be  a  soldier  or  a 
sailor  than  to  follow  some  other  occupation  for  the 
same  reward,  while  others  do  not. 


62 


VALUE. 


Nor  is  it  true  that  every  person  will  acquire  the 
same  skill  in  an  occupation  by  the  same  experi- 
ence ;  for  example,  in  weaving,  one  operator  will 
attend  on  more  looms  than  another  who  has  had 
the  same  practice,  and  do  it  better  than  the  other. 
In  "  The  Effects  of  Machinery  on  Wages,"  by  J.  S. 
Nicholson,  Chap.  3,  it  is  stated  on  the  authority 
of  one  who  knew  the  facts :  "  I  have  known  lads 
to  learn  the  use  of  the  stocking  frame  and  to  be 
able  to  compete  with  men  in  six  or  eight  weeks, 
and  I  have  known  men  who  have  worked  at  the 
trade  for  years  and  can  scarcely  make  a  living.  I 
know  a^  this  time  a  case  of  four  men  working  in 
one  room,  and  one  of  the  four  does  as  much  work 
as  the  other  three,  and  earns  and  receives  as  much 
money  as  the  other  three." 

The  esteem  which  hunters  would  have  for 
superior  skill,  dexterity,  and  ingenuity  would  be 
indicated  by  giving  more  for  two  deer  or  beaver 
than  for  one,  or  more  for  a  well-made  bow  or 
arrow  than  for  an  inferior  one.  Labor  of  itself 
has  no  value,  except  to  keep  the  body  and  mind 
employed  and  in  a  healthy  condition.  As  a  means 
of  production  its  value  is  derived  from  its  product. 
If  that  is  worthless  so  is  the  labor  expended  upon 
it.  Labor,  like  a  tree,  and  some  other  things,  is 
known  and  estimated  by  its  fruits. 

2.    QUANTITY   OF   LABOR. 

It  is  obvious  from  Eq.  (i)  that  the  relative  cost 
of  commodities  "a"  and  "b,"per  unit,  depends 


VAL  UE. 


63 


on  the  absolute  cost  of  each  of  them.  Therefore, 
supposing  "  c  "  or  a  unit  of  cost  to  be  a  unit  quan- 
tity of  labor,  such  unit  must  be  a  definite  amount, 
or  the  theory  of  natural  value  based  on  "quan- 
tities of  labor"  becomes  weak  in  the  knees.  But 
its  chief  exponent  says  (Ricardo,  Chap,  i.  Sec.  2): 
"  In  speaking,  however,  of  labor  as  the  foundation 
of  all  value,  and  the  relative  quantity  of  labor  as 
almost  exclusively  determining  the  relative  value 
of  commodities,  I  must  not  be  supposed  to  be 
inattentive  to  the  different  qualities  of  labor,  and 
the  dijfficulty  of  comparing  one  hour's  or  one  day's 
labor  in  one  employment  with  the  same  duration 
of  labor  in  another.  The  estimation  in  which 
different  qualities  of  labor  are  held  comes  soon 
to  be  adjusted  in  the  market  with  sufficient  pre- 
cision for  all  practical  purposes,  and  depends 
much  upon  the  comparative  skill  of  the  laborer 
and  intensity  of  the  labor  performed.  The  scale, 
when  once  formed,  is  liable  to  little  variation.  If 
a  day's  labor  by  a  working  jeweler  be  more  valu- 
able than  a  day's  labor  by  a  common  laborer,  it 
has  long  ago  become  adjusted,  and  placed  in  its 
proper  position  in  the  scale  of  value." 

According  to  this  statement,  the  position  of 
labor  in  the  scale  of  "quantity"  is  fixed  by  its 
position  in  the  scale  of  "  value,"  i.  e.  ^,  or  relative 
value,  measures  ^,  or  relative  cost,  instead  of  the 
contrary.  If  a  day's  labor  by  a  working  jeweler, 
or  its  product,  is  esteemed  in  the  market  to  be 
more  valuable  than  a  day's  labor  by  a  common 


64 


VAL  UE, 


laborer,  then    the  quantity  of    labor  done  and 
suffered  by  the  former,  per  unit  of  labor  time,  is 
proportionally  greater  than  the  labor  done  and 
suffered  by  the  latter.    The  wages  of  a  diamond 
cutter  in  Amsterdam  being  $5  per  day,  and  of 
a  common  laborer  there  25  cents,  then,  as  ad- 
justed in  that  market,   the    comparative    quan- 
tity  of    their    labor,    per    day,   is   as   20  to    i. 
And  in  the  same  occupation,  e.  g.  jewelry,  with  the 
same  materials  and  implements,  one  jeweler  will 
produce  more  in  quantity  or  quality  than  another 
in  the  same  period  of   labor  time.    So  also   in 
other  occupations,  including  that  of  common  labor. 
Nor  is  the  difference  immaterial  either  for  prac- 
tical purposes,  or  to  the  theory  of  natural  value. 
As  a  matter  of  fact,  two  farmers  will  make  butter 
from  the  same  quality  of  milk,  and  the  product  of 
one  of  them  will  be  esteemed  in  the  market  at 
twice  the  value  of  the  product  of  the  other ;  there- 
fore, as  thus  adjusted,  the  quantity  of  labor  done 
and  suffered  by  the  former  is  double  that  of  the 
latter.     In  the  opinion  of  consumers,  the  sweat 
and  sacrifice  of  the  former,  as  embodied  in  his 
product,  exhales  a  perfume  and  has  an  agreeable 
and  wholesome  taste,  while  the  sweat  and  sacrifice 
of  the  latter  taints  his  product  with  soap-grease 
qualities. 

According  to  Howell  ("  Conflicts  of  Labor  and 
Capital,"  Chap.  4),  in  1877  the  weekly  wages  of 
engineers  in  England  varied  from  25s.  to  45s.;  of 
iron  founders,  in  the  same  locality,  from  24s.  to 


VALUE. 


65 


45s.  He  also  says  (lb.)  that  a  trade  or  labor  union 
only  endeavors  to  fix  a  minimum  wage,  below 
which  none  in  that  employment  shall  work,  or  at 
least  those  who  are  members  of  the  union.  Any 
uniformity  in  wages  arises  from  the  effort  of 
employers  to  make  this  minimum  wage  the  max- 
imum in  all  cases,  and  also  by  sifting  out  the 
drones.  Also  a  labor  union  may  endeavor  to  pre- 
vent the  careful,  diligent,  and  efficient  workman 
from  "  besting  "  his  inferiors,  but  not  with  entire 
success. 

According  to  Carroll  D.  Wright  (Evolution  of 
Wage  Statistics  —  Quar.  Jour,  of  Economics  for 
January,  1892),  in  iron  works,  a  crew  of  nine  men 
all  receive  different  wages,  by  voluntary  agree- 
ment ;  the  weekly  wages  of  women  in  jewelry  at 
Attleboro,  Mass.,  in  1872,  varied  from  $4.50  to  $13  ; 
wages  of  workingmen  in  Massachusetts,  in  1875, 
varied  from  $300  to  $1,800  per  annum;  in  1884, 
the  weekly  wages  of  working  girls  in  Boston, 
Mass.,  varied  from  $1  to  $35  ;  in  1885,  the  weekly 
wages  of  operatives  in  cotton  goods  varied  from 
$5  to  $20  and  over. 

A  person,  instead  of  working  for  hire  or  wages, 
may  work  for  himself  or  profits.  But  there  is  no 
uniformity  in  profits,  even  in  the  same  pursuit ; 
for  otherwise  all  would  succeed  and  nobody  fail 
in  business,  except  from  some  natural  and  inevi- 
table accident.  There  are  about  ten  thousand 
insolvencies  per  annum  in  the  United  States,  in 
prosperous  times,  with  a  still  greater  number  of 


66 


VALUE. 


VALUE. 


67 


cases  where  persons  retire  from  business  after  the 
loss  of  the  whole  or  a  large  part  of  their  capital, 
before  becoming  insolvent.  Young  men  and 
others,  with  capital  or  credit,  are  continually 
engaging  in  some  business  without  having  the 
personal  elements  necessary  to  success  in  it,  and 
are  continually  failing  because  consumers  will 
not  reimburse  them  the  cost  to  them  of  their 
contribution  to  the  supply  of  their  commodity. 
It  is  notorious  that  in  the  same  locality  and  in  the 
same  occupation,  one  company,  firm,  or  person 
does  better  than  another,  the  difference  being  due 
to  him  or  those  who  conduct  the  business.  Mrs. 
Micawber  said  that  the  coal  business  on  the  Trent 
required  talent  and  capital,  and  that  Mr.  Micawber 
was  excluded  from  the  business  for  want  of  the 
latter.  Nobody  would  furnish  it.  If  the  govern- 
ment had  done  so,  without  interest,  and  prohibited 
anybody  from  underselling  him,  he  might  have 
succeeded.  The  Barings  failed  for  want  of  talent. 
One  popular  scheme  of  social  reform  proposes  to 
put  all  the  young  men  at  common  labor  for  five 
years ;  all  the  voting,  ruling,  and  managing  to  be 
done  by  the  graybeards,  who  have  cut  their  eye- 
teeth  and  retired  from  all  labor,  except  headwork, 
on  a  pension.  The  young  women  to  be  employed 
as  assistant  teachers  of  political  economy,  and  to 
entertain  **  sleepers  "  by  taking  them  shopping,  and 
with  music  and  sermons  furnished  by  telephone. 
Adam  Smith  said  (Chap.  5)  that  labor  is  the 
real  measure  of  the  exchange  value  of  all  com- 


modities, i.  e.,  that  |  determines  ^,  Eq.  (i).  But 
he  says  it  is  difficult  to  ascertain  the  proportion 
between  the  different  qualities  of  labor.  The 
time  spent  in  two  different  sorts  of  work  will  not 
always  determine  this  proportion.  The  different 
degrees  of  hardship  endured  and  of  ingenuity 
exercised  must  likewise  be  taken  into  account, 
and  it  is  not  easy  to  find  any  accurate  measure 
of  either.  It  is  adjusted,  however,  he  says,  not 
by  any  accurate  measure,  but  by  the  higgling  and 
bargaining  of  the  market.  Therefore,  according 
to  him  also,  ^,  as  fixed  in  the  market,  measures 
-.    But  the  ratio  ^  continually  varies ;  the  quality 

y  m 

of  the  goods  varies ;  and  for  the  same  quality  ^ 
is  not  the  same,  even  at  the  same  time,  to  all  buy- 
ers and  sellers.  If  they  are  equal  in  all  other 
respects  one  proves  to  be  a  better  higgler  than 
another ;  but,  as  a  matter  of  fact,  some  of  them, 
with  equal  facilities,  produce  n  or  m  at  less  cost 
than  the  others. 

He  also  says  (lb.),  in  substance,  that  wealth 
consists  of  means  of  satisfaction;  that  a  man's 
labor  will  not  directly  supply  him  with  all  of 
these  ;  that  in  order  to  obtain  them  in  kind,  quan- 
tity, and  quality  suited  to  his  wants,  his  wealth 
must  have  purchasing  power ;  having  this  power 
it  gives  its  owner  a  certain  command  over  all  the 
labor  and  all  the  produce  of  labor  which  is  in  the 
market ;  and  a  man's  fortune  is,  therefore,  in  pro- 
portion to  the  extent  of  this  power,  or  to  the 


68 


VALUE. 


quantity  of  other  men's  labor,  or,  what  is  the  same 
thing,  of  the  produce  of  other  men's  labor^ 
which  it  enables  him  to  purchase  or  command. 
Thus  he  makes  the  quantity  of  "other  men's 
labor"  to  be  in  proportion  to  its  purchasing 
power,  or  to  that  of  its  product;  e.  g.,  if  a  week's 
labor  by  two  engineers  in  England,  in  1877,  ^ad, 
respectively,  the  purchasing  power  of  25s.  and 
45s.,  then  the  quantities  of  their  labor,  per  unit 
of  labor  time,  was  in  the  proportion  of  25  to  45. 

3.      THE  DEER  AND   FISH   CASE. 

Ricardo  considered  that  the  doctrine  illustrated 
by  the  deer  and  beaver  case  applied  in  the  later 
as  well  as  in  the  early  stages  of  society,  and  said 
that  the  quantity  of  labor  bestowed  on  commodi- 
ties, whose  production  is  open  to  competition, 
regulates  their  relative  or  exchangeable  value. 
In  order  to  harmonize  this  doctrine  with  the  use 
of  capital  as  an  aid  to  labor,  he  said  (Chap,  i ,  Sec. 
3):  "Even  in  that  early  state  to  which  Adam 
Smith  refers,  some  capital,  though  possibly  made 
and  accumulated  by  the  hunter  himself,  would  be 
necessary  to  enable  him  to  kill  his  game.  With- 
out  some  weapon,  neither  the  deer  nor  the  beaver 
could  be  destroyed,  and,  therefore,  the  value  of 
the  animals  would  be  regulated,  not  solely  by  the 
time  and  labor  necessary  to  their  destruction,  but 
also  by  the  time  and  labor  necessary  for  provid- 
ing the  hunter's  capital,  the  weapon,  by  the  aid 
of  which  their  destruction  was  eflFected." 


VALUE. 


69 


Since  the  hunter  could  not  kill  deer  and  beaver 
without  a  weapon,  he  must,  theretofore,  have  ac- 
quired a  surplus ;  for  in  order  to  make  the  weapon 
its  maker  must  have  materials,  tools,  and  subsist- 
ence during  the  time  of  its  manufacture.  This 
surplus  would  not  be  due  merely  to  the  exercise 
of  greater  industry  than  was  necessary  to  support 
him,  but  also  to  the  exercise  of  frugality  or  absti- 
nence from  consuming  or  squandering  what  this 
greater  industry  produced.  Frugality  or  abstinence 
being  essential  to  the  existence  of  capital,  is  an  ele- 
ment to  be  considered.  Having  capital  the  hunter 
became  enabled  to  procure  a  weapon  and  kill 
deer  and  beaver,  a  thing  which  was  impossible 
for  him  to  do  without  it.  Competition  in  killing 
them  would  be  limited  to  those  who  possessed 
the  necessary  capital ;  those  who  failed  to  acquire 
it  would  be  compelled  to  subsist  as  they  did 
theretofore. 

Also  a  right  of  property  must  have  then 
existed.  And  the  hunter,  being  the  owner  of  his 
weapon,  would  be  entitled  to  all  the  benefit  he 
could  derive  from  it,  either  by  using  it  himself  or 
by  demanding  a  profit  for  its  use  by  others. 

But  assuming  all  men  to  be  exactly  alike,  each 
of  them  would  acquire  an  equal  capital  in  an 
equal  period  of  labor  time ;  whereupon  the  author 
cited  says  (lb.) :  "  Suppose  that  in  the  early 
stages  of  society  the  bows  and  arrows  of  the 
hunter  were  of  equal  value  and  of  equal  durability 
with  the  canoes  and  implements  of  the    fisher- 


ii|i 


70 


VALUE. 


VALUE. 


71 


man,  both  being  the  produce  of  the  same  quantity 
of  labor.  Under  such  circumstances,  the  value  of 
the  deer,  the  produce  of  the  hunter's  day's  labor, 
would  be  exactly  equal  to  the  value  of  the  fish, 
the  produce  of  the  fisherman's  day's  labor.  The 
comparative  value  of  fish  and  game  would  be 
entirely  regulated  by  the  quantity  of  labor  real- 
ized in  each." 

It  is  not  said  that  the  relative  value  of  the  two 
products  would  be  adjusted  in  the  market  with 
sufiicient  precision  for  all  practical  purposes,  nor 
that  their  relative  value  would  be  adjusted,  not  by 
any  accurate  measure,  but  by  the  higgling  and  bar- 
gaining of  the  market ;  but  it  is  asserted  that  the 
value  of  the  two  products  would  be  "exactly 
equal."  It  was  necessary  to  be  exact,  for  a  small 
difference  in  cost  or  value  per  unit  of  product 
during  a  lifetime,  or  for  a  shorter  period  in  produc- 
tion on  a  large  scale,  would  make  a  great  difference 
in  the  total  result.  A  difference  of  a  fraction  of 
a  cent  per  yard  in  the  cost  of  making  cotton  cloth, 
or  in  the  price  obtained  for  it,  makes  the  dif- 
ference between  success  and  failure  in  the  busi- 
ness, and  this  difference  might  be  solely  due  to 
one  of  its  producers  being  a  better  higgler  than 
the  other.  Each  of  them  is  a  buyer  of  materials, 
etc.,  and  a  seller  of  products  on  a  large  scale. 

The  statement  that  the  relative  value  of  the 
two  products  would  be  entirely  regulated  by  the 
quantity  of  labor  realized  in  them  is  not  true. 
Suppose  it  cost  the  same  to  kill  a  deer  as  to  catch 


f 


x  fish ;  this  would  not  determine  how  many  of 
each  was  wanted  at  that  ratio.  The  deer  might 
be  large  and  fat,  the  fish  small  and  poor,  or  vice 
versa.  The  quantity  required  of  each  at  that 
ratio  would  depend  upon  their  relative  use  value. 
If  the  relative  demand  for  them  at  that  ratio  was 
for  n  times  as  many  fish  as  deer,  evidently  n  is 
unknown.  If  there  were  too  many  fishermen, 
the  supply  of  fish  would  be  in  excess  of  the 
demand  for  them.  Some  fishermen  therefore  must 
become  hunters ;  but  to  do  so,  a  fisherman  must 
abandon  his  skill  and  implements,  and  acquire 
those  of  a  hunter.  Bows  and  arrows  being  in 
demand,  and  canoes,  etc.,  not,  the  implements  of 
the  hunter  and  fisherman  would  not  then  be  of 
equal  value.  Relative  demand  is  a  regulator  of 
relative  value. 

This  may  be  shown  by  a  formula : 

If  the  product  of  each  hunter's  day's  labor  was 
p  deer,  then  x.p  fish  would  be  the  product   of 
each  fisherman's  day's  labor.    Assume  p=  i. 
a = total  number  of  producers, 
y= total  number  of  hunters, 

^= total  number  of  fishermen, 
y  +  ^=a.\    ^=number  of  hunters,         (5) 


a.n  . 
n  +  x' 


number  of  fishermen. 


All  of  the  hunters  and  fishermen  being  exactly 
alike,  all  of  them  would  want  the  same  ration. 

Suppose  x=2,  obviously  n  still  remains  un- 
known, and  may  be  set  at  any  figure.  For  n=3 :  40 


73 


VALUE. 


VALUE. 


73 


per  cent  would  be  hunters  and  60  per  cent  fisher- 
man. Total  relative  demand,  40  deer  to  120  fish. 
Each  ration  would  be  0.4  deer  to  1.2  fish.  There 
would  be  24  surplus  deer  to  be  exchanged  for  48 
surplus  fish,  per  hundred  of  producers. 

For  n=>i  :  80  per  cent  would  be  hunters,  and 
20  per  cent  fisherman ;  total  relative  demand,  80 
deer  to  40  fish.  Each  ration  would  be  0.8  deer  to 
0.4  fish,  leaving  16  surplus  deer  to  be  exchanged 
for  32  surplus  fish. 

But  men  are  not  all  exactly  alike ;  therefore, 
with  the  same  implements  the  best  hunter  would 
usually  kill  more  game  per  day  than  the  poorest 
hunter,  and  the  product  of  each  of  them  would 
not  be  "  exactly  equal "  to  that  of  the  same  fisher- 
man.    But,  for  the  same  reason,  the  bows  and 
arrows  of  the  hunters  would  not  all  be  exactly 
alike  merely  because  they  were  the  product   of 
the  same  number  of  day's  labor  by  each  of  them. 
There  is  a  difference  in  bows  and  arrows  and  in 
the  men  who  use  them.    Everybody  could  not 
bend  the  bow  of  Ulysses,  or  shoot  like  William 
Tell  or  Robin  Hood;  nor  could  every  Israelite 
kill  Goliath  with  a  sling,  nor  with  David's  sling. 
In  every  stage  of  society  men  differ,  physically 
and  mentally ;  fish,  game,  and  other  things  vary 
in  quality  and  quantity ;  one  generation  continu- 
ally dies  out  and  another  succeeds,*  having  dif- 
ferent capacities,  tastes,  and  desires  from  their 
fathers ;  n,  or  relative  demand  (Eq.  5),  and  x,  or 
relative  cost,  both  vary.    It  is,  therefore,  hardly 


,1 


worth  while  to  assert  or  assume  that  all  men  are 
exactly  alike,  as  if  they  were  cut  out  by  some 
machine,  and  thereupon  to  assert  that  under  free 
competition  and  with  equal  facilities,  all  hunters, 
fishermen,  or  other  competitors  will  produce  the 
same  amount  in  quantity  or  value  in  the  same 
period  of  labor  time  or  at  the  same  cost.  In  fact, 
some  men  will  produce  more  than  others  having 
the  same  facilities,  from  the  same  land,  mine, 
factory,  workshop,  business,  or  occupation.  If 
there  is  anything  whose  cost  is  uniform,  i.  e.,  the 
same  to  everybody,  it  ought  to  be  pointed  out,  so 
that  those  who  make  a  poor  living,  or  fail  in  busi- 
ness, might  engage  in  its  production  and  succeed 
as  well  as  anybody. 

4.      THE   SUPPLY   REQUIRED. 

The  author  cited  also  says  (Ricardo,  Chap.  2): 
"The  exchangeable  value  of  all  commodities, 
whether  they  be  manufactured,  or  the  produce  of 
mines,  or  the  produce  of  land,  is  always  regulated, 
not  by  the  less  quantity  of  labor  which  will  sufiice 
for  their  production  by  those  who  have  peculiar 
facilities  of  production,  but  by  the  greater  quan- 
tity of  labor  necessarily  bestowed  on  their  pro- 
duction by  those  who  have  no  such  facilities ;  by 
those  who  continue  to  produce  them  under  the 
most  unfavorable  circumstances,  meaning  by  the 
most  unfavorable  circumstances  the  most  unfavor- 
able under  which  the  quantity  of  produce  required 
renders  it  necessary  to  carry  on  the  production." 


74 


VALUE. 


VALUE, 


75 


From  this  it  follows  that  since  one  person, 
with  the  same  facilities,  will  produce  more  than 
another  in  the  same  period  of  labor  time,  from 
the  same  land,  mine,  factory,  or  workshop  than 
another,  he  does  it  by  a  less  ''quantity  of  labor." 
Also,  it  is  the  quantity  of    labor  "necessarily 
bestowed  "  on  the  most  costly  portion  of  "the  sup. 
ply  required  "  of  it,  which  is  the  foundation,  cause, 
or  measure  of  the  exchange  value  of  the  whole 
supply,  per  unit  of  quantity.    When  the  cost  of  a 
product  is  not  uniform  or  the  same  to  everybody, 
"  the  quantity  of  produce  required  "  determines 
the  quantity  of  labor  which  must  be  necessarily 
bestowed  on  the  most  costly  portion  of  such  sup- 
ply.   Wherefore,  it  would  seem  to  be  the  fact 
that   relative   demand  is    the  regulator  of    the 
exchange  value  of  commodities,  by  determining 
how  much  cost  shall  be  expended  on  the  most 
costly  portion  of  the  supply  required  of  each. 

When  the  cost  of  a  product  is  not  uniform, 
x.c  or  y.c  (Eq.  i)  represents  the  cost  per  unit  of 
the  most  costly  portion  of  its  supply. 

Every  two  commodities,  the  cost  of  both  of 
which  is  not  uniform,  have  an  indefinite  number 
of  natural  values. 

First.  Suppose  that  the  supply  required  of  a 
product  whose  cost  was  not  uniform  remained 
constant ;  if  the  production  of  the  less  costly  por- 
tions of  such  supply  increased  or  decreased,  the 
cost  of  the  most  costly  portions  of  such  supply 
would  vary.    Some  of    the  more  efficient    pro- 


ducers might  die,  or  change  their  product  for  one 
which  produced  a  greater  profit,  or  by  increasing 
their  production  save  in  cost  per  unit  of  product 
and  make  a  greater  total  profit  by  taking  a  smaller 
profit  per  unit  of  product. 

Secondly.  Suppose  the  cost  of  commodity  "  a  "  is 
uniform  at  40c.  per  unit,  while  the  cost  of  "  b  "  is 
not  uniform,  the  cost  of  the  most  costly  portion  of 
its  supply  being  15  c.  per  unit,  then  their  relative 
value  is  "  natural "  when  three  units  of  "  a  "  have 
the  same  market  value  as  eight  units  of  "  b."  If 
the  supply  required  of  "  b  "  increased,  the  cost  of 
the  most  costly  portion  of  such  supply  would 
increase  or  decrease,  depending  upon  whether 
such  increased  or  decreased  supply  required  an 
increased  or  decreased  cost  per  unit  for  its  pro- 
duction, e.  g.  15  ±  5.  For  the  plus  sign,  the  rela- 
tive value  of  "  a  "  and  "  b  "  would  be  called  natural 
when  one  unit  of  "a  "  had  the  same  market  value 
as  two  units  of  "  b."  For  the  minus  sign,  their  rela- 
tive value  would  be  natural  when  one  unit  of  "  a  " 
had  the  same  market  value  as  four  units  of  "b." 

If  the  cost  of  both  "  a  *'  and  "  b  "  was  not  uni- 
form, then  ^  (Eq.  i)  might  become  ^. 

5,      GOLD  AND  SILVER. 

In  treating  of  money,  the  author  cited  says 
(Ricardo,  Chap.  27) :  "  Gold  and  silver,  like  other 
commodities,  are  valuable  only  in  proportion  to 
the  quantity  of  labor  necessary  to  produce  them 
and  bring  them  to  market.    Gold  is  about  fifteen 


70 


VAL  UE. 


times  dearer  than  silver,  not  because  there  is  a 
greater  demand  for  it,  nor  because  the  supply  of 
silver  is  fifteen  times  greater  than  that  of  gold, 
but  solely  because  fifteen  times  the  quantity  of 
labor  is  necessary  to  procure  a  given  quantity  of  it." 
According  to  this  statement,  if  silver  cost 
fifteen  times  as  much  as  gold,  to  procure  an  equal 
quantity  of  it,  silver  would  be  fifteen  times  dearer 
than  gold ;  and  if  they  could  be  procured  at  the 
same  cost,  their  value  would  be  the  same  for  equal 
weights  of  each.  But  if  everybody  preferred 
gold  to  silver  in  dentistry ;  a  gold  watch  to  a  silver 
one ;  money,  plate,  jewelry,  and  ornamentation  of 
gold ;  and  if  gold,  in  addition  to  being  more  beau- 
tiful and  durable  than  silver,  were  more  suitable 
for  all  purposes,  then  no  silver  would  be  wanted 
at  an  equal  cost.  Who  would  pay  the  same  price 
for  an  inferior  article  ?  But  if  silver  has  a  greater 
use  value  than  gold  for  some  purposes,  as  being 
more  sonorous,  the  best  conductor  of  heat  and 
electricity,  of  great  use  in  photography,  and  for 
various  purposes  in  chemistry  and  the  arts,  a 
supply  of  silver  might  be  required  to  answer  some 
or  all  of  these  purposes,  although  its  cost  equaled 
or  even  exceeded  that  of  gold.  Gold  was  "  about " 
fifteen  times  dearer  than  silver,  because  it  was 
wanted  at  its  price,  and  not  merely  because  it  cost 
fifteen  times  more  to  produce  it  than  silver. 
Neither  metal  could  be  procured  unless  its 
exchange  value  were  sufl&cient  to  induce  its 
production. 


VALUE. 


77 


Since  about  1873  silver  has  been  largely  disused 
for  money.  Germany  adopted  a  gold  standard, 
and  other  countries  have  done  and  are  doing  the 
same ;  also,  electroplate,  German  silver,  and  other 
alloys  have  largely  supplanted  silver  for  various 
other  purposes.  Although  the  production  of  both 
metals  has  very  greatly  increased  since  1873,  yet 
in  1896  gold  was  over  thirty  times  dearer  than 
silver. 

The  cost  of  procuring  either  metal  is  not  uni- 
form. Therefore,  the  author  might  have  said 
that  gold  was  about  fifteen  times  dearer  than  sil- 
ver solely  because  the  cost  of  the  most  costly 
part  of  the  supply  required  of  gold  was  fifteen 
times  greater  than  the  most  costly  part  of  the 
supply  required  of  silver,  for  equal  weights  of 
each.  And  unless  he  ascertained  in  units  of  labor 
what  was  the  quantity  of  it  "necessarily  bestowed  " 
on  the  most  costly  portion  of  the  supply  of  each 
metal,  per  ounce,  or  other  unit  of  quantity,  he 
probably  measured  the  relative  cost  of  their  pro- 
duction by  their  relative  market  value  for  equal 
weights  of  each,  and  which  then  made  gold 
**  about"  fifteen  times  dearer  than  silver. 

Gold  occurs  in  an  almost  pure  state  in  the  beds 
of  streams,  in  alluvial  deposits,  in  certain  rocks, 
and  also  combined  with  other  metals  and  sub- 
stances in  veins  or  lodes.  Silver  rarely  occurs 
native,  but  is  found  in  deposits  and  veins  of  its 
ores  combined  with  other  metals  and  substances, 
sometimes  with  gold.    The  deposits  and  veins  of 


78 


VALUE. 


VALUE. 


79 


both  metals  vary  greatly  in  richness  and  facility 
in  mining  and  extracting  the  precious  metal. 
The  same  mine  varies  continually  in  this  respect, 
rarely  producing  for  any  length  of  time  a  uniform 
kind  and  quantity  of  ore.  In  some  cases  the  prec- 
ious metals,  or  one  of  them,  is  the  chief  product, 
and  the  baser  metals,  or  some  one  or  more  of  them, 
are  a  by-product.  In  other  cases  the  precious  metal 
is  the  by-product.  There  are  mines  of  lead  and  of 
copper  containing  precious  metal,  and  especially 
silver,  in  the  ore,  which  would  be  extracted 
although  its  value  was  quite  nominal.  Twenty 
ounces  or  less  of  silver  in  a  ton  of  pig  lead  greatly 
injures  its  value.  In  some  countries  mining  is 
done  mainly  by  manual  labor,  and  the  ore  reduced 
by  crude  and  primitive  methods ;  in  others,  mining 
and  reduction  of  the  ore  is  done  by  and  with  the 
latest  improved  methods  and  machinery. 

Some  countries  produce  gold  only,  as  Africa, 
Brazil,  also  formerly  the  United  States  and  Aus- 
tralia; others,  silver,  as  Peru;  others  produce 
both.  Great  Britain  produces  neither,  except  to 
a  very  small  amount  and  as  a  by-product ;  yet  the 
London  quotations  fix  daily  the  relative  value  of 
gold  and  silver  throughout  the  commercial  world. 

Those  who  produce  the  most  costly  portion  of 
the  supply  of  either  metal,  wherever  they  may  be, 
do  so  for  a  reward,  actual  or  expected,  which  they 
deem  adequate,  each  of  them  measuring  cost  and 
its  reward  for  himself.  A  Chinaman  will  work  over 
a  placer  which  has  been  abandoned  by  an  Ameri- 


can and  find  gold  enough  to  reward  his  sacrifices. 
According  to  Jacobs  ("  Precious  Metals,"  Chap. 
25):  "  In  Columbia,  river  washing  is  extensively 
practiced.  The  sand  at  the  bottom  of  the  rivers 
abounds  in  particles  of  gold  and  platinum,  but  the 
labor  is  attended  with  little  profit.  It  is  carried 
on  by  an  indolent  race  of  independent  peasants, 
who  have  few  wants,  and  who,  by  some  exertion 
and  occasional  success,  gain  sufficient  to  subsist 
on  scanty  resources." 

The  cost  of  foreign  products,  e.  g.,  gold  and 
silver  in  England,  is  the  cost  of  their  acquisition 
(Ricardo,  Chap.  7).  If  an  English  trader  ex- 
changed or  exchanges  glass  beads,  colored  cloth, 
rum,  etc.,  for  gold  on  the  coast  of  Guinea,  in  this 
exchange  of  equivalents  (?)  the  trader  might  say 
that  the  negro's  reward  outweighed  its  cost,  or 
else  he  would  not  have  worked  for  it,  and  might 
also  say  the  same  as  to  an  exchange  of  English 
wares  for  gold  with  an  Asiatic  or  a  South  Ameri- 
can Indian,  or  for  silver  with  a  Peruvian  or  Mex- 
Neither  metal  would  be  acquired  always, 


lean. 


everywhere,  and  by  every  trader,  or  any  one  of 
them,  at  the  same  cost. 

It  is  the  exchange  value,  or  general  purchasing 
power,  of  either  metal  which  justifies  its  pro- 
duction or  acquisition,  and  not  merely  its  value 
relative  to  the  other ;  therefore,  if  the  exchange 
value  of  either  be  increased  by  any  means  affect- 
ing the  demand  for  it,  that  will  extend  the  margin 
of  its  production  and  increase  its  supply,  while  a 


80 


VALUE, 


VALUE. 


81 


decrease  in  its  exchange  value,  caused  as  above, 
will  discourage  its  production  and  tend  to  decrease 
its  supply.  Also,  a  decrease  in  the  cost  of  pro- 
duction of  either,  caused,  e.  g.,  by  improvements 
in  mining  and  metallurgy,  stimulates  its  produc- 
tion and  tends  to  increase  its  supply. 

According  to  the  report  of  the  Director  of  the 
Mint  for  1896,  p.  221,  the  average  commercial 
ratio  of  silver  to  gold  during  1894  was  32.56 ;  dur- 
ing  1895  was  31.60;  during  1896,  30.66,  or  an 
average  for  the  three  years  of  31.27  to  i. 

The  same  report,  p.  46,  gives  the  approximate 
stock  of  money  in  the  principal  countries  of  the 
world  in  dollars  (counting  gold  per  fine  ounce = 
$20.671834,  and  silver  per  fine  ounce =$1.292929, 
p.  230).  Gold,  $4,143700,000 ;  silver,  full  tender! 
$3,616,700,000;  limited  tender,  $620,200,000;  un- 
covered paper,  $2,558,000,000. 

The  product  of  both  metals  has  been  increas- 
ing for  many  years,  very  great  improvements 
having  been  made  in  mining  and  in  metallurgy. 
As  to  the  effect  of  the  cyanide  process,  see  p.  132 
of  the  report.  The  production  during  1895  was : 
Gold,  fine  ounces,  9^694,640= $200,400,000 ;  silver, 
fine  ounces,  168,308,3 5 3 =$2 17,610,800  (p.  232  of 
the  report).  At  this  rate  of  production  the 
amount  produced  in  about  twenty  years  would 
equal  the  world  s  present  stock  of  gold  and  silver 
coins. 

Although    the    most    costly    portion    of    the 
increased  and  increasing  supply  of  silver  has  been, 


and  continues  to  be,  produced  at  a  profit  sufficient 
to  induce  its  production,  the  producers  of  silver 
and  others,  who  constitute  a  numerous  and 
powerful  party,  insist  that  the  relative  value  of 
the  two  metals  shall  be  fixed  arbitrarily  and  by 
force  of  law  at  a  ratio  more  favorable  to  silver 
than  the  existing  commercial  ratio,  by  means  of 
what  is  called  bimetallism,  or  the  free  and 
gratuitous  coinage  of  the  two  metals  at  such  fixed 
legal  ratio.  Since  everything  is  bought  and  sold 
for  money  the  world  over,  it  is  insisted  that  inter- 
national bimetallism  at  a  fixed  ratio  as  above  will 
cause  the  commercial  ratio  to  agree  with  it, 
although  free  coinage  by  one  nation  only  would 
not  have  that  effect,  but  merely  cause  its  money 
to  consist  of  the  cheaper  metal. 

If  bimetallism  as  above  were  universally 
adopted,  unless  there  were  a  uniform  system  of 
coinage,  foreign  trade  would  be  carried  on  as  now, 
by  estimating  metal,  whether  coined  or  not,  as 
so  much  bullion.  A  people  accustomed  to 
pounds,  shillings,  and  pence,  or  other  system  of 
money,  would  hardly  consent  to  use  strange  coins 
and  systems  of  money,  or  precious  metal  in  the 
form  of  bullion,  as  it  was  used  in  the  time  of 
Abraham.  Also,  although  both  metals  were 
freely  coined  everywhere,  a  whole  people,  or  a 
whole  community,  or  individuals  separately, 
might,  and  probably  would,  stipulate  for  payment 
in  the  kind  of  coin  which  they  preferred,  and 
which  would  probably  be  the  one  with  which  they 

6 


82 


VALUE. 


had  become  familiar,  and  by  means  of  which  they 
had  been  accustomed  to  estimate  values.    Also, 
some  nations  prefer  to  have  a  large  part  of  their 
currency  in  paper  money,  and  some  from  choice 
or    necessity    have    no  other  kind.     Heretofore 
every  nation  has  adopted  a  kind  and  system  of 
money  which  suited  its  people  and  their  condition. 
International  bimetallism  would  be  indefinitely 
postponed  if  it  were  necessary  to  wait  until  it  was 
universally  agreed  to.     If  the  countries  which  now 
refuse  free  coinage  to  silver,  or  the  principal  part 
of  them,  as,  for  example,  the  United  States,  Great 
Britain,  Canada,  Egypt,  Australia,  France,  Ger- 
many, Belgium,  Austria- Hungary,   Netherlands, 
Denmark,  Sweden,  and  Norway,  would  agree  to 
adopt  bimetallism  at  the  ratio  of,  e.  g.,  15^  to  i,  it 
would  be  quite  as  much  as  can  be  expected.    Those 
using  a  paper  or  silver  currency  may  be  omitted. 
The  money  of  the  countries  above  named,  ex- 
pressed  in   United   States  dollars  coined  at  the 
ratio  of  15.988+  to  i,  consists  of  $3,255,000,000  in 
gold;    $1,214,800,000  in   full   tender  silver;   and 
$1,113,200,000  in  uncovered  paper  (Report  of  the 
Director  of  the  Mint  for  1 896,  p.  46).    According  to 
the  above  report,  p.  232,  the  world's  production  of 
gold  and  silver  during  1895,  expressed  in  United 
States  dollars,  was  $418,016,800.     Deducting  one- 
fifth  of  this  for  the  new  bullion  used  in  the  indus- 
trial arts,  and  assuming  that  all  old  material  derived 
therefrom  is  again  used  solely  for  that  purpose, 
then  at  the  rate  of  production  of  the  precious 


VALUE. 


83 


metals  during  1895  there  could  be  added  to  the 
currencies  of  the  gold-standard  countries  above 
named,  coin    to    the    amount,  as   expressed    in 
United  States  dollars,  of  $335,000,000  per  annum, 
which,  in  less  than  fourteen  years,  would  double 
the  full  legal-tender  coins  of  those  countries,  and 
enable  them  also  to  double  their  present  stock  of 
uncovered  paper.     All  of  the  new  bullion  would 
be  coined  in  gold  standard  countries.     For  silver, 
when  coined  there,  would  have  its  purchasing 
power  doubled  and  a  debt-paying  power  at  the 
fixed  ratio  equal  to   gold.      For  example,  every 
debt  payable  in  England  would  become  at  once 
payable  in  silver  pounds  sterling  coined  at  the 
ratio,  e.  g.,  of  151^  to  i.     No  gold  or  silver  bullion 
would  be  coined  in  silver  standard  countries,  e.  g., 
into  rupees ;  for  the  silver  in  those  countries' must 
rise  to  its  value  as  bullion,  which  would  probably 
be  caused  by  its  exportation  for  coinage  in  the 
gold  standard  countries. 

International  bimetallism  as  above,  if  adopted 
and  enforced,  would  double  the  gold  price  of  silver, 
enrich  its  present  producers,  extend  the  margin 
of  its  production,  greatly  increase  its  supply, 
decrease  prices  and  increase  debts  in  silver  stand- 
ard countries,  raise  prices,  lessen  debts,  encourage 
speculation,  and  (it  is  said)  thereby  give  a  fillip 
to  business  in  gold  standard  countries. 

An  advocate  of  bimetallism  (F.  A.  Walker), 
who  favors  cheap  money  and  the  ** fillip"  idea] 
declines  to  base  his  argument  on  any  specific 


n 


84 


VAL  UE. 


ratio,  with  good  reason,  for  the  question  is,  bi- 
metallism being  agreed  to,  how  cheap  shall  money 
be  made  ?  Since  the  coinage  ratio  to  be  adopted 
is  purely  arbitrary,  suppose  it  were  fixed  at  i  to  i. 
The  total  output  of  silver  during  the  two  years 
1894-5  was  332,918,747  fine  ounces  (above  report, 
p.  232),  which  at  $20.67  per  ounce  would  coin  into, 
in  United  States  dollars,  over  $6,769,000,000 ;  three 
years  of  product  would  coin  into  more  than  the 
world's  present  stock  of  coins.  This  hardly  seems 
desirable,  unless  a  confiscation  of  all  debts  and 
the  adoption  of  a  Chinese  currency  is  considered 
to  be  so.  How  much  ought  debts  to  be  confis- 
cated and  prices  be  raised  in  order  to  give  the 
proper  '* fillip"  to  business? 

Another  advocate  of  international  bimetallism 
("  Popular  Fallacies  Regarding  Bimetallism,"  by 
Sir  R.  P.  Edgcombe,  p.  143)  says  that  the  Argentine 
paper  dollar,  worth  one-quarter  its  nominal  value 
in  gold,  enabled  that  country  to  undersell  India  in 
wheat,  whose  silver  rupee  had  only  depreciated 
one-half.  Sundry  American  advocates  of  bimet- 
allism insist  that  the  depreciated  India  rupee  has 
enabled  that  country  to  undersell  the  United 
States  in  the  same  article.  From  this  it  would 
seem  that  if  the  United  States  would  adopt 
a  paper  currency  more  depreciated  than 
that  of  Argentine,  this  country  could  under- 
sell all  the  world  in  all  products.  The  proper 
way  to  enrich  this  country  is  to  make  the 
dollar  smaller. 


VALUE. 


85 


If  a  cheap  money  is  desirable,  why  not  have  an 
exclusively  paper  currency?  It  is  workable  al- 
though made  very  abundant.  After  it  has  given 
one  "fillip"  to  business,  make  the  money  more 
abundant  and  give  business  another  ''fillip." 
Why  not  adopt  an  international  paper  money,  so 
that  no  nation  will  be  enabled  to  enrich  itself  and 
undersell  others  by  cheapening  its  money,  and 
the  whole  world  thereby  enjoy  "  the  endless  bene- 
fits of  a  common  currency"  at  a  nominal  cost? 

It  is  asserted  by  the  advocates  of  the  free  coin- 
age of  silver  that  gold  has  appreciated  since  1873, 
relative  to  other  things,  because  their  gold  price 
has  fallen ;  not  because  of  the  decreased  cost  of 
their  production,  but  because  of  the  appreciation 
in  the  value  of  gold.  Wages  have  greatly  in- 
creased since  1873,  as  estimated  in  gold  coin. 
Hence,  gold  has  not  appreciated,  but  in  fact  de- 
preciated relative  to  wages ;  gold  wages  have  in- 
creased greatly,  and  real  wages,  or  the  purchasing 
power  of  money  wages,  still  more.  This  point  is 
attempted  to  be  evaded  by  saying  that  the  laborer 
gets  a  larger  share  of  the  product  than  he  did 
before.  But  his  labor,  aided  by  improved  meth- 
ods and  machinery,  has  become  more  productive 
than  it  was  in  1873,  so  that  although  he  gets  more 
product,  it  does  not  follow  that  he  gets  a  larger 
share  of  the  total  product  than  before.  Whether 
he  does  or  not,  in  this  country  money  wages  are 
paid  in  gold  or  its  equivalent,  and  since  the 
laborer  gets  more  gold  for  his  labor  than  he  did 


86 


VALUE. 


in  1873,  therefore,  in  this  country  at  least,  gold 
has  depreciated  relative  to  labor.  According  to 
very  high  authority,  labor  is  the  real  measure  of 
the  exchange  value  of  all  commodities.  In  the 
Presidential  canvass  of  1896,  the  laborers  gener- 
ally failed  to  see  that  wages  paid  in  cheap  dollars 
would  benefit  them.  If  it  were  desirable  to  pay 
them  in  such  dollars,  it  could  be  more  readily 
effected  by  a  paper  inflation  of  the  currency  than 
by  its  inflation  with  silver  dollars  coined  at  15^^ 
to  I. 

The  effect  of  international  free  coinage  would 
seem  to  be  to  discourage  the  production  of  gold 
and  encourage  the  production  of  silver ;  to  narrow 
up  the  margin  of  production  of  the  former,  and 
extend  that  of  the  latter. 

6.     AN  AGGREGATE   SUM   OF  LABOR. 

In  another  illustration  of  the  theory  that  the 
exchange  value  of  products  is  in  proportion  to 
the  quantity  of  labor,  direct  and  indirect,  be- 
stowed on  their  production,  it  was  said  (Ricardo, 
Chap.  I,  Sec.  3):  "In  estimating  the  exchange- 
able value  of  stockings,  for  example,  we  shall 
find  their  value,  comparatively  with  other  things, 
depends  upon  the  total  quantity  of  labor  neces^ 
sary  to  manufacture  them  and  bring  them  to 
market.  First,  there  is  the  labor  necessary  to 
cultivate  the  land  on  which  the  raw  cotton  is 
grown  ;  secondly,  the  labor  of  conveying  the  cot- 
ton  to  the  country  where  the  stockings  are  to  be 


VALUE. 


87 


manufactured,  which  includes  a  portion  of  the 
labor  bestowed  in  building  the  ship  in  which  it 
is  conveyed,  and  which  is  charged  in  the  freight 
of  the  goods;  thirdly,  the  labor  of  the  spinner 
and  weaver ;  fourthly,  a  portion  of  the  labor  of 
the  engineer,  smith,  and  carpenter  who  erected  the 
buildings  and  machinery,  by  the  help  of  which 
they  were  made;  fifthly,  the  labor  of  the  retail 
dealer  and  many  others  whom  it  is  unnecessary 
to  particularize.  The  aggregate  sum  of  these 
various  kinds  of  labor  determines  the  quantity  of 
other  things  for  which  these  stockings  will  ex- 
change, while  the  same  consideration  of  the  vari- 
ous quantities  of  labor  which  have  been  bestowed 
on  those  other  things  will  equally  govern  the  por- 
tion of  them  which  will  be  given  for  the  stock- 
ings." 

Although  not  mentioned  in  the  statement 
above  quoted,  yet  the  fact  is  that  no  one  would 
prepare  land  for  cultivation,  build  ships,  make 
stockings  and  other  things  for  the  purpose  of 
exchange  unless  a  right  of  property  existed  and 
its  owner  was  protected  in  its  enjoyment ;  there- 
fore, a  portion  of  the  various  kinds  of  labor  ex- 
pended to  protect  persons  and  property  on  land 
and  water  against  robbers,  pirates,  and  others 
who  claim  an  equal  right  to  the  earth,  would  fig- 
ure in  the  above  mentioned  *'  aggregate  sum " 
unless  such  protection  was  furnished  gratis. 

Also  the  cost  of  a  foreign  product,  e.  g.  cot- 
ton in  England,  is  the  cost  of  its  acquisition,  and 


88 


VALUE. 


VALUE, 


89 


not  of  its  production  (Ricardo,  Chap.  7).    In  order 
to  state  "an  aggregate  sum"  correctly  there  must 
be  not  only  a  proper  unit,  but  also  the  proper 
items.  Therefore,  it  seems  quite  proper  to  inquire 
what  the  stockings  cost  their  maker.    The  pro- 
ducers   of    cotton,    machinery,    etc.,    sell    their 
products,  either  directly  or  indirectly,  to  him,  so 
that  it  is  the  cost  of  the  stockings  to  him  relative 
to  their  exchange  value  which  induces  their  pro- 
duction by  him.    The  cost  of  the  cotton,  mill, 
machinery,  etc.,  to  him  would  be  the  then  value 
of  what  he  gave  for  them,  whatever  may  have 
been  theretofore  the  cost  to  him  of  acquiring  the 
means  necessary  to  make  the  purchase.   Whether 
he  obtained   such    means  by  the  very  painful 
exercise  of  industry  and  frugality  during  a  long 
period  of  time,  or  from  profits  realized  by  him  in 
the  production  of  the  less  costly  portion  of  the 
supply  required    of  some    commodity,  or  from 
speculations  in  buying  and  selling,  or  by  gift  or 
inheritance,  his  capital  would  equally  enable  him 
to  engage  in  the  manufacture  of  stockings. 

Laborers,  although  properly  instructed  and 
directed,  can  not  build  a  ship,  make  machinery, 
etc.,  unless  they  are  provided  with  subsistence,' 
implements,  and  materials.  No  one  can  produce 
anything  for  sale  unless  he  possesses  means  suffi- 
cient to  procure  the  necessary  materials  and  im- 
plements, and  to  support  him  until  his  product 
by  its  sale  will  replace  his  outlays ;  thereafter  his 
further  outlays  are  made  from  the  replacement  of 


>;. 


his  capital  by  the  sale  of  his  product,  if  sufficient 
for  the  purpose. 

The  theory  of  natural  value  is  based  on  free 
competition,  which  is  limited  to  those  who  have 
the  necessary  capital  and  are  induced  by  a  suffi- 
cient motive  to  take  part  in  it.  They  determine, 
in  view  of  the  present  and  prospective  market 
value  of  commodities,  what  things  shall  be  pro- 
duced for  sale,  each  of  them  deciding  for  himself 
what  his  product  shall  be.  If  every  competitor 
thought  he  could  obtain  a  better  reward  for  his 
labor  and  capital  in  some  other  way,  no  cotton 
stockings  would  be  produced  for  sale  ;  for  in  such 
case  their  exchange  value,  in  the  opinion  of  each 
competitor,  would  be  below  their  cost  of  produc- 
tion to  him.  The  relative  cost  of  products,  which 
is  said  to  regulate  their  relative  value,  is  their 
relative  cost  to  those  who  own  and  produce  them 
in  the  market  for  sale. 

Those  who  work  for  hire  do  not  determine  the 
nature  of  the  product  nor  the  method  of  its  pro- 
duction. If  any  of  them  do,  they  are  not  ordinary 
hired  men,  but  as  managers  or  foremen  are  paid, 
often  large  sums,  for  their  mental  labor  and  busi- 
ness ability.  Hired  laborers  do  what  they  are 
directed  to  do  by  their  employer  for  a  reward  to 
be  paid  to  them  whether  their  labor  produces  any- 
thing of  value  or  is  profitable  to  their  employer 
or  not;  that  is  a  matter  for  him  to  consider. 
When  there  is  a  loss  his  hired  men  set  up  no  claim 
to  a  share  in  it.    The  cost  of  hired  labor  to  him  is 


90 


VALUE. 


I 


the  value  of  what  he  pays  for  it.  Wages  is  one 
of  his  outlays,  which  he  pays  out  of  his  capital 
when  he  begins  business,  and  thereafter  from  its 
replacement  by  the  sale  of  his  product,  if  suffi- 
cient for  the  purpose,  and  if  not,  then  from  his 
other  resources. 

According  to  the  author  cited,  the  cost  of  the 
stockings  consists  of  the  labor  bestowed  on  the 
cotton  and  a  portion  of  the  labor  bestowed  on  the 
ship,  mill,  machinery,  etc.  The  stocking-maker, 
by  the  purchase  of  them,  steps  into  the  shoes  of 
their  producers,  who,  without  capital,  could  not 
have  produced  them ;  for  even  the  hunter  could 
not  kill  game  without  a  weapon.  If  no  more 
stockings  could  be  produced  by  the  same  •*  quan- 
tity of  labor"  intelligently  directed,  or  "neces- 
sarily bestowed,"  when  a  part  of  it  is  indirectly 
expended  upon  a  knitting  mill  than  if  all  the 
labor  were  directly  expended  in  knitting  the 
stockings  by  hand,  there  would  be  no  motive  for 
building  it ;  nor  would  there  be  any  such  motive 
unless  the  stocking-maker  could  gain  something 
by  its  use,  instead  of  employing  laborers  to  spin 
the  yam  on  spinning  wheels  and  knit  the  stock- 
ings with  knitting  needles.  How  they  could 
make  the  stockings  without  implements  of  some 
kind  would  seem  to  be  more  difficult  than  to  kill 
game  without  a  weapon. 

But  it  is  said  that  while  implements  are  pro- 
ductive  of  quantity,  they  are  not  productive  of 
value.    For  (Ricardo,  Chap.  20):  "If  an  improved 


VALUE. 


91 


piece  of  machinery  should  enable  us  to  make  two 
pair  of  stockings  instead  of  one,  without  addi- 
tional labor,  double  the  quantity  will  be  given 
for  a  yard  of  cloth.  If  a  similar  improvement  be 
made  in  the  manufacture  of  cloth,  stockings  and 
cloth  will  exchange  in  the  same  proportion  as 
before,  but  they  will  both  have  fallen  in  value ; 
for  in  exchanging  them  for  hats,  for  gold,  or 
other  commodities  in  general,  twice  the  former 
quantity  must  be  given.  Extend  the  improve- 
ment to  the  production  of  gold  and  every  other 
commodity,  and  they  will  regain  their  former 
proportions.  There  will  be  double  the  quantity  of 
goods  annually  produced  in  the  country  and  there- 
fore the  wealth  of  the  country  will  be  doubled, 
but  this  wealth  will  not  have  increased  in  value." 
But,  in  such  case,  every  commodity,  per  unit 
of  quantity,  would  have  the  same  purchasing 
power  as  before  the  increase ;  and  the  number  of 
units  being  doubled,  their  value  expressed  in 
terms  of  a  unit  of  any  one  of  them,  as  an  ounce 
of  gold,  would  be  doubled,  although  their  ratio 
of  exchange  per  units  of  quantity  remained  the 
same.  Also,  in  such  case,  if  a  hired  laborer,  oper- 
ating the  improved  machinery,  received  for  the 
same  "  quantity  of  labor "  the  same  number  of 
units  of  commodity  as  before,  they  would  have 
the  same  purchasing  power  and  the  same  value 
to  him  as  before ;  the  increase  in  quantity  being 
due,  as  above  supposed,  solely  to  the  improved 
machinery,  would  justly  belong  to  its  owners. 


92 


VALUE. 


VALUE. 


93 


If  the  original  quantity  were  doubled,  not  by 
improved  machinery,  but  by  the  laborers  working 
longer  hours  and  with  greater  diligence,  or  by 
doubling  the  number  of  laborers,  commodities 
would,  according  to  the  author  cited,  exchange  in 
the  same  proportions  as  before.  In  this  case, 
also,  there  would  be  double  the  quantity  of  com- 
modities produced  in  the  country,  and  therefore 
the  wealth  of  the  country  would  be  doubled,  but 
this  wealth  would  not  have  increased  in  value 
any  more  than  if  the  quantity  were  doubled  by 
using  improved  machinery,  as  above  supposed. 

The  author  cited  also  says  (Chap.  20):  "If  ten 
men  turned  a  corn  mill,  and  it  was  discovered 
that  by  the  assistance  of  wind  or  water,  the  labor 
of  these  ten  men  may  be  spared,  the  flour  which 
is  the  product  partly  of  the  work  performed  by 
the  mill  would  immediately  fall  in  value  in  pro- 
portion to  the  labor  saved."  If  so,  the  owner  of 
the  old  mill  would  gain  nothing  by  discarding  it 
for  the  new  one,  even  if  he  could  have  it  for  noth- 
ing. It  is  also  said  (Ricardo,  Chap.  30) :  "  If  the 
natural  value  of  bread  fell  50  per  cent,  the  demand 
for  it  would  not  greatly  increase,  for  no  one  would 
desire  more  than  would  satisfy  his  wants,  and,  as 
the  demand  would  not  increase,  neither  would  the 
supply,  for  a  commodity  is  not  supplied  because 
it  can  be  produced,  but  because  there  is  a  demand 
for  it."  In  such  case  consumers  would  obtain 
their  supply  of  bread  for  one-half  as  much  of  their 
products  as  before,  thus  leaving  the  other  half 


unsold,  while  those  whose  labor  was  saved  would 
be  compelled  to  compete  with  them  in  order  to 
obtain  their  supply  of  flour  and  other  necessaries. 
If  double  the  original  quantity  of  bread  was 
produced,  the  supply  would  be  nearly  100  per  cent 
in  excess  of  the  demand.     And  since  the  supply 
must  conform  to  the  demand  in  order  to  exchange 
or  sell  at  its  natural  value,  it  follows  that  mis- 
directed labor  confers  no  value,  or  at  least  no 
value  in  proportion  to  its  quantity.    Somebody 
must  determine  beforehand  whether  there  is  a 
demand  for  a  product,  and  if  so  take  the  risk  that 
the  supply  is  not  in  excess  of  the  demand.     Hired 
laborers    merely  perform   the  task  assigned  to 
them ;  whether  the  result  of  their  labor  will  be 
worth  much,  little,  or  nothing  is  not  for  them  to 
determine.    Their  claim  to  a  reward  rests  upon 
the  ground  of  monopoly  ;  an  employer  can  have 
their  labor  by  paying  for  it,  otherwise  not.    The 
least  they   can  permanently  accept  is  a  subsist- 
ence for  themselves  and  their  families  ;  the  most 
an  employer  can  afford  to  give  is  an  amount 
which  will  leave  his  capital  intact  and  also  a  sup- 
port   for    him  and  his  family.     Between  these 
limits  the  amount  of  reward  to  be  paid  for  hired 
labor   is    a  matter  of    negotiation  between  the 
parties.    When  the  employer  can  gain  by  adopt- 
ing improved  methods  and  machinery,  he  adopts 
them  instead  of  using  hired  labor. 

A  blind   horse  hitched   to  a  lever,  with  his 
halter  fastened  to  a  pole  in  front  of  him,  will  lead 


■^ 


^4 


VALUE. 


himself  round  and  do  the  work  of  several  men,  or 
the  propelling  force  maybe  wind  or  water. 

Adam  Smith  says  that,  in  the  first  steam 
engines,  a  boy  was  constantly  employed  to  open 
and  shut  alternately  the  communication  between 
the  boiler  and  the  cylinder,  according  as  the  piston 
ascended  and  descended.  A  boy  thus  employed 
observed  that  by  tying  a  string  from  the  handle 
of  the  valve  which  opened  the  communication 
to  another  part  of  the  machine,  the  valve  would 
open  and  shut  without  his  assistance.  Thereupon 
the  string  dispensed  with  the  labor  of  the  boy. 

He  also  says:  **A  broad- wheeled  wagon, 
attended  by  two  men  and  drawn  by  eight  horses, 
in  about  six  weeks'  time,  carries  and  brings  back 
between  London  and  Edinburgh,  near  four  ton 
weight  of  goods.  In  about  the  same  time  a  ship 
navigated  by  six  or  eight  men,  and  sailing 
between  the  ports  of  London  and  Leith,  fre- 
quently carries  and  brings  back  200  ton  weight  of 
goods.  Six  or  eight  men,  therefore,  by  the  help 
of  water  carriage,  can  carry  and  bring  back  in  the 
same  time  the  same  quantity  of  goods  between 
London  and  Edinburgh  as  fifty  broad-wheeled 
wagons  attended  by  100  men  and  drawn  by  400 
horses.  A  train  of  cars,  attended  by  six  or  eight 
men  or  less,  will  now  carry  between  the  same 
points  a  much  greater  quantity  of  goods  in  less  than 
one-tenth  of  the  time.  An  ocean  steamer,  carry- 
ing thousands  of  tons  of  freight  and  hundreds 
of  passengers,  will  cross  the  Atlantic  in  a  week. 


VALUE. 


95 


In  the  time  of  Adam  Smith,  ten  men,  by  exert- 
ing themselves,  could  make  48,000  pins  in  a  day. 
In  1888  a  machine  made  180  pins  of  a  greatly 
superior  quality  in  a  minute.  The  coil  of  wire 
was  put  in  its  proper  place,  the  end  fastened,  and 
the  almost  human  piece  of  mechanism  with  its 
iron  fingers  did  the  work.  Seventy  machines 
were  tended  by  three  men,  while  a  machinist 
with  a  boy  helper  kept  them  in  order.  After 
allowing  for  stoppages,  the  machines  produced 
per  day  over  20,000  papers  of  pins  of  300  pins 
each.  ('*  Recent  Economic  Changes,"  by  Wells, 
p.  60.)  In  Adam  Smith's  time  an  expert  nailer 
could  make  several  hundred  nails  per  day;  now  a 
machine  makes  them  by  the  kegful. 

The  cotton  gin  superseded  a  great  part  of  the 
labor  previously  required  to  separate  the  cotton 
from  the  seed ;  and  machinery  now,  almost  auto- 
matic, converts  the  cotton  into  a  great  variety  of 
fabrics.  The  age  of  handcraft  ended  and  the  age 
of  machinery  began  about  1 770-80.  According  to 
Mulhall,  spinning  machinery  attended  by  one 
operative  produced  as  much  yarn  in  1 8 1 5  as  200 
could  a  few  years  before;  in  1855  the  ratio  had 
more  than  tripled.  The  crane  at  the  Cologne 
Cathedral,  in  1870,  with  two  men  did  the  same 
work,  in  lifting  stone,  in  one  hour  as  required 
sixty  men  working  twelve  hours  in  the  middle 
ages.  A  California  harvester  cuts,  threshes,  and 
bags  sixty  acres  of  grain  in  a  day,  and  a  roller  mill 
will  make  10,000  barrels  of  flour  in  the  same  time. 


: 

i 


1 

!: 


96 


VALUE. 


I 


Implements  and  machines  do  better  work  than 
can  be  done  without  them,  and  work  which  would 
be  otherwise  impossible.  Watt  thought  that  he 
had  done  well  when  he  made  a  piston  and  cylinder 
agree  to  within  three-eighths  of  an  inch;  now  they 
can  be  made  so  accurately  that  the  piston  feels 
quite  loose  in  the  cylinder  when  their  diameter 
differs  only  one-five-thousandth  part  of  an  inch. 
Instruments  measure  distance,  area,  volume, 
weight,  time,  force,  light,  heat,  velocity,  electricity, 
gild,  carve,  set  type,  talk,  play  music,  make  pic- 
tures, discover  microbes,  nebula,  and  the  elements 
composing  the  stars,  send  a  message  around  the 
world  in  a  few  seconds  and  the  human  voice  a 
thousand  miles.  There  is  also  the  machine  to 
make  a  machine. 

In  the  early  stages  of  society,  laborers  make 
their  own  implements  and  therewith  kill  deer, 
beaver,  and  catch  fish.  Population  is  sparse  and 
their  living  poor  enough.  In  the  later  stages  of 
society,  the  producer,  with  his  own  capital  or  bor- 
rowed, buys  his  materials  and  instruments,  hires 
laborers  to  work  for  him,  and  if  the  exchange 
value  of  his  product  exceeds  his  outlays,  he  makes 
a  profit,  otherwise  not.  Whereupon,  taking  linen 
instead  of  cotton  stockings,  it  is  said  (J.  S.  Mill, 
B.  3,  Chap.  4) :  "  The  flax  spinner,  part  of  whose 
expenses  consists  of  the  purchase  of  flax  and  of 
machinery,  has  had  to  pay  in  their  price,  not  only 
the  wages  of  the  labor  by  which  the  flax  was 
grown  and  the  machinery  made,  but  the  profits  of 


VALUE. 


97 


the  grower,  the  flax  dresser,  and  the  machine 
maker.  All  of  these  profits,  together  with  those 
of  the  spinner  himself,  were  again  advanced  by 
the  weaver,  in  the  price  of  his  material,  linen 
yam ;  and,  along  with  them,  the  profits  of  a  fresh 
set  of  machine-makers  and  of  the  miners  and  iron 
workers  who  supplied  them  with  their  metallic 
material.  All  of  these  advances  form  part  of  the 
cost  of  the  production  of  the  linen.  Profits, 
therefore,  as  wel  as  wages,  enter  into  the  cost  of 
production,  which  determines  the  value  of  the 
produce." 

To  this  he  might  have  added,  that  all  these 
wages  and  profits  make  linen  cost  less  per  yard  than 
if  the  grower  of  the  flax  had  made  the  linen  him- 
self. Every  additional  person  who  participates 
in  the  production  of  linen  does  so  only  by  being 
able  to  reduce  its  cost.  And  although  every  capi- 
talist,  directly  or  remotely  concerned  in  its  pro- 
duction, and  so  also  of  other  things,  is  above 
supposed  to  get  a  profit,  the  hired  laborer  obtains 
for  his  labor,  necessaries,  comforts,  and  luxuries 
beyond  anything  conceived  of  the  savage  laborer, 
who,  '*  in  that  original  state  of  things  which  pre- 
cedes both  the  appropriation  of  land  and  the 
accumulation  of  stock,"  gets  the  whole  product. 

According  to  Mulhall,  the  population  of  Eng- 
land in  1780  was  about  nine  and  one-half  millions ; 
in  1880,  over  thirty-five  millions,  during  which 
time  the  ratio  of  paupers  to  population  greatly 

decreased ;  the  wages  of  common  labor  increased 
7 


I 


98 


VALUE. 


two  and  one-half  times;  real  wages  more.  The 
increase  in  population  is  sufficient  evidence  of  an 
increase  in  the  well-being  of  the  people.  The 
hired  laborer  who  competes  with  and  is  super- 
seded by  some  machine  finds  new  demands  for 
his  labor  and  obtains  more  for  it  than  before. 
Those  laborers  who  can  attend  on  machinery 
claim  and  get  higher  wages  for  their  intelligence, 
skill,  and  mental  labor.  Mere  physical  force  can 
be  exerted  by  a  machine  or  a  beast.  Both  the 
hired  laborer  and  his  employer  get  a  less  reward 
per  unit  of  product  than  in  the  days  of  hand- 
craft, but  receive  a  much  greater  total  reward. 
The  greatly  increased  quantity  of  products  fur- 
nishes more  to  consume  and  more  to  exchange  at 
home  and  abroad. 

7.      COST  OF   PRODUCTION. 

The  cost  of  a  product  to  its  producer  consists 
of  his  outlay  expended  on  it,  with  a  profit  suffi- 
cient to  induce  him  to  produce  it.  This  is  the 
debit  side  of  the  account,  for  which  the  realized 
value  of  the  product  must  compensate  him  or  else 
there  is  a  loss.  What  reward  will  induce  a  per- 
son to  engage  in  or  to  continue  to  produce  a  thing 
is  estimated  by  himself.  If,  however,  he  invests 
his  capital  and  labor  in  any  business,  it  may  be 
thence  inferred  that  the  expected  reward  ex- 
ceeded its  expected  cost,  and,  if  he  continues  in 
the  business,  not  merely  to  retrieve  his  capital,  it 
may  be  thence  inferred  that  he  obtains  a  reward 


VALUE. 


99 


which  is  by  him  deemed  adequate  and,  in  his 
opinion,  is  at  least  as  great  as  he  could  otherwise 
obtain  at  the  same  cost  to  him. 

A  producer  makes  outlays  for  plant  (fixed  cap- 
ital), for  materials,  hired  labor,  etc.  (circulating 
capital).  The  plant  deteriorates  as  time  elapses, 
wears  out,  and  may  become  old  lumber  by  being 
superseded  by  something  better.  The  materials 
are  used  up,  the  amount  paid  for  hired  labor,  etc., 
is  gone.  His  wealth  exists  "in  supposition.'* 
Its  investment  lies  open  to  loss  from  the  elements; 
his  own  incapacity ;  the  inefficiency,  negligence, 
ill-will,  and  dishonesty  of  his  employes;  the 
wrongful  acts  of  evil-doers,  and  the  fluctuation 
in  the  value  of  what  he  buys  and  what  he  sells. 
Present  goods  are  certain  and  have  a  present 
value;  future  goods  are  uncertain  as  to  their 
existence,  amount,  and  value.  Money,  or  money's 
worth,  embarked  in  business  does  not  always 
return  to  its  owner,  with  or  without  a  profit. 
Unless  the  value  of  the  fixed  capital  as  it  oozes 
out  of  the  plant  is  absorbed  by  the  product  it 
evaporates;  unless  the  value  of  the  circulating 
capital  reappears  in  the  product  it  ceases  to  cir- 
culate; and  unless,  on  a  proper  balance  struck 
between  receipts  and  outlays,  there  is  a  balance  in 
favor  of  the  former  he  has  lost  among  other 
things  his  labor. 

In  August,  1894,  the  operatives  in  the  cotton 
mills  at  Fall  River  and  New  Bedford  struck,  at 
which  time,  as  stated  in  the  newspapers,  plain 


^1 


100 


VALUE, 


cotton  cloth  sold  at  25^  cents  per  yard;  wages 
being  a  cent  a  yard,  besides  which,  there  were 
repairs,  depreciation  of  plant,  materials,  motive 
power,  waste,  cost  of  marketing  goods,  bad  debts, 
taxes,  and  insurance. 

Outlays  are  made  in  money,  the  product  is  sold 
for  money,  and  the  profit  or  loss  stated  in  money. 
Since  everything  is  bought  and  sold  for  money, 
every  person,  in  order  to  compare  his  reward  with 
the  sacrifice  which  he  makes  to  obtain  it,  takes 
the  money  unit  as  the  unit  of  cost  and  value  to 
him,  the  cost  of  which  to  him  is  the  cost  of  its 
acquisition  by  him,  and  its  value  to  him  is  the 
benefit  which  he  can  derive  from  it  or  by  means 
of  it,  and  which  must  exceed  or  outweigh  its  cost 
to  him  in  order  to  furnish  a  motive  for  its  acquisi- 
tion.  The  money  unit  furnishes  a  measure  of 
both,  although  it  does  not  represent  the  same 
amount  of  either  to  everybody  nor  always  to  the 
same  person,  even  if  no  alterations  are  made  in 
the  money.  The  wages  of  labor  consist  of  money 
or  money's  worth,  and  money  wages  better  enable 
a  laborer  to  compare  his  reward  with  his  sacrifice 
than  payment  in  kind  or  out  of  a  truck  store. 

In  socialism,  labor  for  a  certain  period  of  time, 
e.  g.  an  hour,  is  taken  as  the  unit  of  cost  and  value, 
it  being  falsely  assumed  that  labor  for  the  same 
period  of  time  causes  the  same  amount  of  sacrifice 
to  every  person  who  undergoes  it ;  that  in  such 
time  each  of  them  will  produce  the  same  amount 
in  product  or  value,  and  that  the  same  amount  of 


VALUE. 


101 


product  will  aflford  everyone  the  same  amount  of 
satisfaction.  If  any  difference  is  supposed  to  exist 
between  one  kind  of  labor  and  another,  such  dif- 
ference will  be  determined  not  by  the  laborer  but 
by  his  overseers.  Everything  will  be  considered 
worth,  in  certificates  of  labor  time,  the  quantity  of 
labor  time  bestowed  on  its  production,  regardless 
of  its  quality ;  e.  g.,  a  horse  will  be  worth  the  same, 
if  blind,  unsound,  and  vicious,  as  if  he  was  sound 
and  kind.  But  it  seems  reasonable  to  suppose  that 
any  one  who  was  compelled  "to  do  time "  under 
ground,  in  the  mines,  or  on  the  surface  at  any 
work  which  was  disagreeable  to  him,  and  who 
received  for  his  certificates  of  labor  time  stale 
eggs,  butter,  meat,  vegetables,  and  other  things  of 
an  inferior  quality,  would  consider  a  fluctuating 
paper  currency  in  a  state  of  freedom  a  better 
measure  of  cost  and  value  than  certificates  of  labor 
time  in  a  state  of  slavery. 

Profit  is  said  to  consist  of  interest  on  capital, 
insurance  against  risk,  and  wages  of  superintend- 
ence (J.  S.  Mill,  B.  2,  Chap.  15).  It  being  said 
that  the  return  for  abstinence  from  consuming  the 
capital  is  interest  at  the  current  rate  on  the  best 
security;  such  security  as  precludes  any  appre- 
ciable chance  of  losing  the  principal ;  that  the  rate 
of  profit  greatly  exceeds  this,  a  part  of  which  is 
compensation  for  risk,  called  insurance ;  for  capi- 
tal embarked  in  business  is  always  exposed  to 
some  and  in  many  cases  to  very  great  danger  of 
partial  or  total  loss,  for  which  there  must  be  com- 


102 


VALUE, 


pensation,  or  the  risk  will  not  be  incurred ;  that  to 
control  the  operations  of  industry  with  efficiency 
requires  great  assiduity  and  often  no  ordinary 
skill,  which  must  be  remunerated  ;  the  rest  of  the 
profit  goes  for  this  purpose,  called,  as  above,  wages 
of  superintendence. 

The  wealth  of  this  country  is  said  to  have 
increased  about  50  per  cent  in  the  decade  1880-90, 
a  period  of  peace  and  great  prosperity,  being  an 
increase  of  a  little  over  4  per  cent  per  annum. 
During  the  same  time  the  population  increased 
over  30  per  cent.    A  large  part  of  this  increase  in 
wealth  consisted  of  savings  from  wages  and  sal- 
aries;  the  deposits  in  the  savings  banks  alone 
amounted  in  dull  times,  after  the  panic  in  1893,  to 
wit,  in  1894,  to  over  $1,800,000,000.    The  current 
rate  of  interest  during  the  above  period  was  not 
less  than  4  per  cent  per  annum.    Deducting  the 
savings  of  hired  labor,  either  risk  was  great  or 
the  abstinence,  assiduity,  and  skill  were  small. 
According  to  Giffen,  the  increase  in  the  wealth  of 
Great  Britain  in  the  decade  1875-85  was  less  than 
25  per  cent.    The  money  sunk  in  the  Panama 
Canal  was  largely  derived  from  the  savings  of 
French  laborers. 

Misdirected  and  mismanaged  capital  produce 
loss  instead  of  profit.  In  time  past  many  States 
of  the  Union  spent  large  sums  on  canals  and 
roads,  few  of  which  proved  to  be  of  any  value, 
the  result  being  high  taxes,  general  poverty,  and 
in  some  cases  State  insolvency.    Prior  to  1589  Sir 


VALUE. 


103 


Walter  Raleigh  sunk  ;^40,ooo  in  his  efforts  to 
colonize  Virginia.  One-fourth  of  this  sum  at  5 
per  cent  per  annum,  compounded  half-yearly, 
would  now  greatly  exceed  the  present  wealth  of 
Great  Britain.  So  also  would  a  penny  at  the  time 
of  the  Norman  Conquest. 

Because  the  owner  of  capital  can  demand  inter- 
est, capital  is  said  to  beget  a  profit,  and  therefore 
to  be  capable  of  perpetual  growth  and  increase. 
But  capital  can  also  beget  a  loss.  Many  discover 
that  capital  has  wings ;  that  its  essence,  value,  is 
volatile.  Debts  are  not  always  paid  in  full  with 
interest ;  even  banks  and  governments  sometimes 
make  default  in  payment,  and  some  who  hide 
their  treasure  fail  to  find  it  again.  Besides  loss 
from  the  elements,  war,  civil  commotion,  and  the 
acts  of  evil-doers,  there  is  great  risk  that  the  per- 
son who  embarks  his  capital  in  business  does  not 
possess  the  personal  qualities  necessary  to  control 
his  operations  with  efficiency.  No  underwriter 
will  insure  against  this  risk.  Whether  capital 
will  beget  a  loss  or  a  profit  depends  on  its  mana- 
ger, inevitable  accidents  excepted. 

In  the  same  locality  and  in  the  same  business 
one  person  or  company  will  do  better  than  an- 
other, the  difference  being  due  to  the  manage- 
ment. In  1 891,  of  the  no  mills  at  Oldham, 
England,  the  stock  of  sixty-seven  of  them  was  at  a 
discount  (**  Methods  of  Industrial  Remuneration,'* 
Schloss,  p.  148,  note).  Of  sixty-seven  manufact- 
uring companies  in  Massachusetts,  engaged  in 


104 


VALUE. 


various  kinds  of  business,  including  cotton  and 
woolen  manufactures,  bleaching,  belting  and 
machiner>%  being  all  or  which  figures  are  given 
for  ten  years,  to  wit,  1882^2,  a  period  of  great 
prosperity,  ?iVQ  stopped,  seven  had  their  capital 
impaired  and  renewed,  and  twelve  increased  their 
capital.  These  twenty-four  companies  taken  to- 
gether paid  less  than  one-half  of  i  per  cent  per 
annum  on  their  capital  stock,  and  the  whole  sixty- 
seven  taken  together  paid  2.06  per  cent  per 
annum  on  the  average  value  of  their  capital  stock. 
{Social  Economist  for  September,  1892.) 

Of  two  similar  mills  making  plain  cotton  cloth, 
one  better  managed  than  the  other  will  make  a 
greater  profit,  or  make  a  profit  while  the  other 
makes  a  loss,  by  saving  in  outlay  and  gain  in  the 
value  of  the  product,  as,  by  saving  in  repairs,  de- 
preciation, waste,  employing  more  efficient,  care- 
ful, and  honest  employes,  buying  suitable  material 
and  selling  product  at  the  right  time  and  to  solvent 
parties.  Cotton  is  not  of  uniform  quality  in  the 
fiber,  nor  equally  free  from  moisture,  sand,  dirt, 
and  leaves.  Both  materials  and  product  vary 
continually  in  price. 

Profit  varies  with  the  person  according  to  his 
abilities  and  good  fortune.  Every  owner  of  loan 
capital  does  not  obtain  the  same  rate  of  interest 
on  the  same  security.  Even  the  public  funds 
vary  in  price.  If  a  farmer  with  a  capital  equal 
to  1,000  quarters  of  corn  produces  i  ,200  quarters 
one  year,  his  product  will  probably  be  more  or 


II 


(6 


( 


VALUE. 


105 


less  the  next;  and  his  profit  would  not  be  20 
per  cent  in  corn  unless  the  product  was  of  the 
same  quality  as  his  capital,  nor  in  value,  unless 
the  product  per  quarter  was  worth  the  same  as 
the  outlay.  Also  if  one  farmer,  on  an  average, 
made  a  profit  of  20  per  cent  in  corn  or  in 
value,  all  farmers  with  an  equal  capital  will  not 
do  the  same,  nor  will  others  in  other  occupations 
all  make  that  profit  by  becoming  farmers. 

Those  who  make  the  greatest  profit  on  their 
capital  often  do  so  by  making  a  low  rate  of  profit 
per  unit  of  product  and  by  quick  sales  turn  over 
their  circulating  capital  often  during  the  period 
for  which  profit  is  computed.  And  it  is  the  total 
profit  which  a  person  can  make  in  his  occupation 
that  determines  the  direction  of  his  competition, 
while  it  is  the  cost  per  unit  of  product  that  is  said 
to  determine  its  natural  value. 

It  is  said  (J.  S.  Mill,  B.  2,  Chap.  15):  "  Profit 
varies  greatly  with  the  person,  and  can  scarcely 
be  the  same  in  any  two  cases.  It  depends  on  the 
knowledge,  talents,  economy,  and  energy  of  the 
capitalist  or  of  the  agents  he  employs,  on  the 
accidents  of  personal  connection,  and  even  on 
chance.  Hardly  any  two  dealers  in  the  same 
trade,  even  if  their  commodities  are  equally  good 
and  equally  cheap,  carry  on  their  business  at  the 
same  expense  or  turn  over  their  capital  in  the 
same  time.  That  equal  capitals  make  equal  prof- 
its as  a  general  maxim  of  trade  would  be  as  false 
as  that    equal  age  or   size  gives    equal  bodily 


106 


VALUE. 


Strength,  or  that  equal  reading  or    experience 
gives  equal  knowledge." 

But  it  is  said  that  profit  is  no  part  of  the  cost 
of  production,  but  is  only  a  deduction  from  the 
product  of  the  hired  labor ;  a  tribute  levied  on  it 
by  the  owner  of  capital  by  means  of  his  monopoly. 
Adam  Smith  said  that  a  master  would  have  no 
interest  to  employ  a  workman  unless  his  stock  was 
replaced  with  a  profit,  which  is  a  share  in  the 
produce  of  his  workmen  or  in  the  value  which 
their  labor  adds  to  the  materials  on  which  it  is 
bestowed;  that  perhaps  it  may  be  thought  that 
profit  is  only  a  different  name  for  the  wages  of  a 
particular  sort  of  labor,  the  labor  of  inspection 
and  direction ;  that  profit  bears  no  proportion  to 
the  quantity,  hardship,  or  ingenuity  of  this  sup- 
posed labor;  that  in  many  great  works  almost  the 
whole  labor  of  this  kind  is  committed  to  some 
principal  clerk,  whose  wages  express  the  value  of 
this  labor  of  inspection  and  direction. 

When  capital  is  invested  in  great  works  or 
small  ones,  it  must  be  replaced  or  the  master 
would  suffer  loss,  and  if  the  workmen  are  paid 
wages,  that  must  also  be  deducted,  wherefore  the 
profit  can  not  be  greater  than  what  is  left. 

But  works,  great  or  small,  do  not  necessarily 
make  a  profit,  large  or  small,  so  that  there  is  an 
element  affecting  the  result  which  is  not  consid- 
ered when  it  is  said  that  profit  is  a  share  in  the 
product  of  the  hired  labor.  It  being  evident  that 
great  works  would  grow  small  and  small  ones. 


VALUE. 


107 


g^ow  smaller  without  a  manager,  it  is  obvious 
there  must  be  some  "supposed  labor"  of  inspec- 
tion and  direction ;  and  if  only  a  part  of  it  is  done 
by  a  principal  clerk,  his  wages  fail-  to  express  the 
value  of  the  whole  of  it. 

Suppose  there  is  a  loss  or  no  profit,  the  work- 
men can  say,  we  obeyed  the  orders  and  direc- 
tions g^ven  to  us  ;  we  are  not  responsible  for  the 
result ;  we  are  entitled  to  our  wages  wholly  irre- 
spective of  the  result.  The  principal  clerk  can 
also  say,  I  executed  in  detail  the  general  orders 
g^ven  to  me,  therefore  I  am  entitled  to  my  wages 
like  the  other  hired  men.  I  did  not  determine 
the  general  or  specific  nature  of  the  product,  sell 
it,  or  buy  the  materials.  Or,  suppose  he  does  all 
the  "supposed  labor"  of  inspection  and  direc- 
tion, and  there  is  a  loss.  He  could  say :  I  was 
employed  to  run  the  works  and  produce  the  com- 
modity which  constitutes  its  product,  e.  g.  cotton 
stockings,  thread,  cloth,  bicycles,  or  some  other 
article.  There  was  no  adequate  demand  for  the 
product,  the  business  was  already  overdone,  or 
the  price  of  materials  and  labor  was  too  high,  etc. 
And  even  if  his  employer  could  say  :  Mr.  A.  ran  * 
his  works  and  made  a  profit  while  you  made  a 
loss,  the  principal  clerk  might  reply,  I  performed 
my  duty  to  the  best  of  my  ability  and  that  is  all  I 
agreed  to  do ;  therefore  pay  me  my  wages. 

An  owner  of  a  ship  and  cargo  employs  a  cap- 
tain and  crew  to  make  a  certain  vo3'^age.  The 
crew  set  and  furl  the  sails,  raise  and  drop  the 


108 


VALUE. 


\t~ 


anchor  as  directed.  The  ship  arrives  at  the  des- 
tined  port,  the  cargo  is  landed  and  disposed  of  as 
directed.  The  captain  and  crew  earn  their  wages 
irrespective  of  the  result,  and  are  entitled  to  no 
more  or  less,  whether  there  is  a  profit  or  a  loss. 

Another  author  (Rodbertus)  asserts  that  goods 
are  the  product  solely  of  the  labor,  direct  and 
indirect,  which  performs  the  material  operations 
necessary  to  their  production.     For  example,  a 
newspaper  is  the  product  solely  of  those  who  per- 
form the  material  operations  necessary  to  make 
the  paper,  ink,  type,  printing  press,  and  to  print 
the   newspaper.    Obviously  some    "head-work" 
was  necessary  to  effect  this  final    result.     But 
waiving  this,  the  value  of  the  newspaper,  except 
for  base  uses,  and  for  which  clean  paper  would  be 
preferable,  depends  upon  its  contents.     If  these 
are  worthless,  so  also  is  the  newspaper,  no  matter 
how  much  labor  may  be  expended  on  the  mate- 
rial operations  necessary  to  produce  it.    Obviously 
the  asserter  of  this  doctrine  would  be  more  pro- 
ductively employed  in  making  printer's  ink  or 
setting  type  than  in  racking  his  brains  to  invent 
or  maintain  some   theory  intended   to  vest  the 
hired  laborer  with  an  exclusive  right  to  the  whole 
product ;  for,  by  his  own  theory,  he  produces  no 
goods  nor  anything  of  value. 

It  is  said  by  J.  S.  Mill  (B.  2,  Chap.  15):  -  The 
reason  why  capital  yields  a  profit  is  because  food, 
clothing,  materials,  and  tools  last  longer  than  the 
time  required  to  produce  them ;  so  that  if  a  cap- 


VALUE. 


10» 


italist  supplies  a  party  of  laborers  with  these 
things  on  condition  of  receiving  all  they  produce, 
they  will,  in  addition  to  reproducing  their  own 
necessaries  and  instruments,  have  a  portion  of 
their  time  remaining  to  work  for  the  capitalist. 
Thus  we  see  that  profit  arises,  not  from  the  inci- 
dent  of  exchange,  but  from  the  productive  power 
of  labor,  and  the  general  profit  of  the  country 
is  what  the  productive  power  of  labor  makes  it, 
whether  any  exchange  takes  place  or  not." 

This  seems  to  be  an  artful  statement  of  the 
doctrine  more  fully  elaborated  by  the  socialist 
(Marx),  to  wit,  the  laborers  work  a  portion  of 
their  time  to  make  a  profit  for  the  capitalist. 
Profit  is  a  deduction  from  or  a  share  in  the  prod- 
uct of  their  labor.  From  which  it  follows  that 
if  any  party  of  laborers  fail  to  produce  a  profit,  it 
is  solely  because  they  do  not  work  long  enough ; 
their  labor  day  is  too  short.  Neither  profit  or  loss 
is  at  all  due  to  the  "  inspection  and  direction  " 
of  the  capitalist,  for  he  is  supposed  to  do  nothing 
except  to  furnish  the  capital.  Production  is  not 
carried  on  in  that  way.  The  capitalist  supplies 
himself  with  the  necessary  means  and  instru- 
ments, and  hires  laborers  to  do  as  he  and  his  fore- 
man direct.  For  their  work  he  pays  them  wages, 
and  if  the  exchange  value  of  his  product  exceeds 
his  outlays  he  makes  a  profit,  otherwise  not.  If 
he  makes  a  profit,  he  is  said  by  the  socialist  "  to 
exploit "  his  laborers.  If  he  makes  a  loss,  he  may 
be  said  to  " exploit"  himself. 


\ 


110 


VALUE. 


VALUE. 


Ill 


A  party  of  laborers  without  a  manager  would 
be  like  an  army  without  a  general,  a  mere  mob, 
fit  only  to  tread  on  each  other's  heels.     Until 
laborers  can  make  voluntary  cooperation  a  suc- 
cess, their  proper  course  is  to  deposit  their  sav- 
ings in  banks,  to  be  loaned  out  at  interest  to  their 
employers,  or  used  as  a  fighting  fund  to  maintain 
strikes  for  higher  wages.     When  coercive  coop- 
eration or  socialism  is  adopted,  the  managers  of 
the    scheme    must    determine  beforehand  what 
things  shall  be  produced,  how  much  of  each,  in 
what  manner,  by  whom,  and  by  the  proper  sub- 
alterns see  that  every  man  performs  his  allotted 
task,  for  otherwise  the  molecules  of  the  social 
organism  would  suffer  from  inanition.    The  labor- 
ers will    allow  something    as  a  deduction  from 
the  product  of  their  labor  to  their  managers  and 
overseers  on  the  score  of  equality  and  fraternity, 
for  they  do  no  labor,  properly  so  called.    The 
brain  of  this  social  octopus  will   be  a  parasite 
feeding  upon  what  is  gathered  by  its  legs  and 
arms. 

Also  exchange  value  has  something  to  do  with 
the  existence  and  amount  of  profit.  For  if  any- 
thing is  produced  for  which  there  is  no  adequate 
demand,  because  there  is  already  an  overstock,  or 
because  it  is  not  wanted,  there  is  little  hope  of 
profit,  however  productive  of  quantity  the  labor 
bestowed  upon  it  may  be.  Laborers  operating  a 
knitting  mill  would  produce  stockings  of  some 
sort.    Their  product,   however  great,  could  not 


reproduce  their  necessaries  and  instruments 
with  or  without  a  profit,  except  by  way  of 
exchange,  and  not  then  unless  the  exchange 
value  of  the  product  was  sufficient  for  the 
purpose.  If  the  product  remained  unsold,  or 
was  unsalable,  the  laborers  could  not  repro- 
duce even  their  victuals,  although  they  worked 
night  and  day. 

The  quantity  of  products  is  not  increased  by 
exchanging  them,  nor  by  transporting  them  from 
where  they  are  not  to  where  they  are  wanted,  but 
their  value  is.  If  either  party  to  an  exchange 
gained  nothing  by  it,  there  would  be  no  motive 
on  his  part  for  making  it.  If  wheat  had  no 
greater  exchange  value  abroad  than  at  home 
there  would  be  no  motive  for  its  exportation.  A 
product  in  excess  of  what  its  producer  can  use  or 
consume  himself  is  worthless  to  him  except  for 
the  purpose  of  exchange,  and  its  value  to  him  is 
in  proportion  to  its  purchasing  power.  If  surplus 
products  remained  in  the  hands  of  their  pro- 
ducers, manufacturers  would  starve,  while  farmers 
would  go  naked.  Without  exchanges,  surplus 
products  might  be  called  potential  wealth — until 
they  rotted.  But  as  actual  wealth  they  are  meas- 
ured by  their  value,  which  is  greatest  when  they 
have  reached  the  hands  of  those  who  want  them 
the  most,  to  wit,  their  consumers,  although  after 
their  consumption  nothing  is  left  of  them  except 
the  benefit  they  have  conferred  in  the  satisfaction 
of  wants. 


112 


8.  CAPITAL  AND   INTEREST. 


Since  more  goods  can  be  produced  by  the  aid 
of  capital  than  without  it,  even  if  their  ratio  of 
exchange  remain  the  same  when  produced  in 
such  vast  quantities  by  machinery,  more  or  less 
automatic,  as  when   everything  was  hand-made, 
there  are  more  things  to  consume  and  exchange 
than  before,  and  therefore  the  aggregate  exchange 
value  of  each  of  them  has  manifestly  increased. 
The  intelligent  socialist  loves  capital  so  much 
that  he  wants  to  acquire  it,  not  by  the  exercise 
of  industry  and  frugality,  but  by  confiscation. 
He  wants  to  stand  in  the  shoes  of  the  capitalist, 
and  enjoy  the  use  and  benefitof  his  capital.     Not 
that  he  really  thinks  that  a  party  of  laborers, 
without  a  competent  manager,  if  supplied  with 
food,  clothing,  materials,  and  tools,  will  reproduce 
their  necessaries  and  instruments  and  still  have  a 
portion  of  their  time  left  to  work  for  the  capitalist, 
but  because  the  managers  who  will  do  the  head- 
work  and  will  possess  and  control  everything,  will 
have  him  among  their  number,  perhaps  as  their 
chief.    To  furnish  a  pretext  for  the  confiscation 
of  capital,  it  is  asserted  that  hired  laborers,  after 
reproducing  their  necessaries  and  instruments, 
work  an  additional  period  of  time  to  make  a  profit 
for  the  capitalist,  which  profit  is  surplus  labor 
value  extracted  by  him  out  of  them,  and  which 
continually  adds  to  and  causes  the  growth  of 
capital.      But  since  no  one  could   or  can  hire 


VALUE. 


113 


laborers  unless  he  had  or  has  acquired  capital,  it 
is  necessary  to  attack  its  original  acquisition.     It 
was  said  by  the  socialist  (Marx) :     "At  the  dawn 
of  capitalist     roduction— and  every  capitalist  up- 
start  must    go  through    the    historical    stage- 
avarice  and  the  desire  to  be  rich  were  the  ruling 
passions."      The    socialist    wants    to    confiscate 
capital  in  order  to  punish  greed;  the  frugality 
and  abstinence   necessary    to   maintain  it  after- 
wards to  be  endured  and  suffered  as  a  national 
calamity  by  the  body  politic  as  a  social  organism. 
In  this  country  the  origin  of  capital  is  not  lost  in 
the  mists  of  antiquity.      Poverty  migrated  and 
migrates  here,  not  wealth.     In  a  wide  continent, 
where  all  had  equal  opportunities,  those  who  were 
diligent  and  frugal  acquired  wealth,  more  or  less, 
depending  upon  their  abilities  and  good  fortune. 
And  such  is  still  the  case ;  a  large  part  of  the  con- 
tinent still  remains  unsettled,  while  land  in  many 
of  the  oldest  States  can  be  acquired  at  a  nominal 
price.     In  fact  the  industrious  and  frugal  man 
makes  savings  everywhere,  although    in    some 
countries  he  must  conceal  his  treasure  to  prevent 
its  confiscation  by  the  public  or  private  robber. 
Doctor  Franklin  saved  money  while  working  for 
wages  as  a  printer  in  London ;  he  drank  water 
while  his  co-workers  drank  beer.     Poor  Richard 
said :   ''Without  economy  no  revenue  is  sufficient." 
Savings  enable  a  laborer  to  acquire  implements,  a 
stock  in  trade,  or  land  and  cattle.    After  he  has 
acquired  sufficient  to  be  his  own  employer,  he  is  a 

8 


114 


VALUE. 


capitalist.  The  hired  laborer  who  is  diligent,  tem- 
perate, frugal,  and  honest,  is  an  incipient  capital- 
ist ;  he  belongs  to  the  class  of  men  which  furnishes 
the  millionaires.  Those  who  regard  industry 
and  frugality  as  great  sacrifices  and  spend  all 
they  might  save  on  drink  and  other  extravagance 
belong  to  the  class  which  furnishes  the  paupers. 

The  capitalist  upstart  usually  begins  by  work- 
ing for  hire;  he  is  diligent,  frugal,  able,  and 
honest ;  he  makes  himself  more  and  more  useful 
to  his  employer,  gets  higher  and  higher  wages, 
until  he  is  taken  in  as  a  partner  or  starts  in  busi- 
ness for  himself.  Numerous  instances  might  be 
cited  from  the  most  eminent  concerns  in 
Chicago,  whose  members  began  as  hired  men. 
When  a  successful  house  ceases  to  be  composed  of 
upstarts,  it  becomes  infected  by  dry  rot  and  pros- 
perity forsakes  it. 

When  the  upstart  has  proved  himself  to  be 
trustworthy  he  can  command  loan  capital  or  the 
savings  of  others.  Having  ability,  honesty,  fru- 
gality, industry,  and  fortitude,  others  are  ready 
to  bet  that  he  will  pay  his  debts ;  although  calam- 
ity may  possibly  overtake  him,  they  believe  he 
will  do  to  trust.  About  his  premises  there  is 
vigilance  and  efficiency;  his  methods,  imple- 
ments, materials,  and  employes  are  of  the  best ; 
he  is  a  good  buyer  and  a  good  seller,  or  employs 
those  who  are ;  his  outlays  are  a  minimum,  his 
product  a  maximum  and  suited  to  the  market. 
Loiterers,  incapables,  and  high  livers  can  not  with- 


VALUE. 


115 


Stand  his  competition  ;  it  is  ruinous  to  them  ;  he 
supplies  consumers  with  what  they  want  at  too 
cheap  a  rate. 

When  the  upstart  has  achieved  great  success 
everybody  wants  to  share  profits  with  him,  and 
think  that  he  ought  to  pay  the  taxes,  support  the 
poor,  and  cry  over  the  prodigal,  the  loafer,  and 
the  tramp.  Social  agitators  denounce  him,  urge 
his  employes  to  strike  for  higher  wages,  and  are 
ready  to  confiscate  his  property  or  to  destroy  it, 
and  to  do  him  personal  violence.  He  has  bought 
and  sold  at  the  market  price  and  become  rich, 
while  others  who  did  the  same  have  consumed  or 
lost  their  capital  and  become  poor,  or  never 
acquired  any  and  remained  poor.  He  has  prac- 
ticed legerdemain  ;  he  possesses  the  art  of  extract- 
ing surplus  value  out  of  the  labor  of  his  hired 
men,  while  others,  who  paid  the  same  wages, 
possess  the  art  of  having  surplus  value  extracted 
out  of  them ;  others,  the  art  of  not  extracting 
any  surplus  value  out  of  their  own  labor,  or  of 
spending  it  if  they  do ;  and  still  others  of  doing 
no  more  labor  than  necessity  compels  them  to  do. 

The  rich  Rockefeller,  in  1864,  was  working  for 
hire  as  a  clerk  ;  his  partner,  Andrews,  was,  or  had 
been,  a  hired  laborer  in  an  oil  refinery,  when  by 
some  mental  labor  he  devised  a  method  whereby 
more  kerosene  could  be  obtained  from  petroleum 
than  by  any  method  then  known.  With  the  aid 
of  borrowed  capital  his  process  was  tried  and 
proved  to  be  a  success.    At  that  time  the  residue 


116 


VALUE. 


'II 


was  waste  or  used  for  fuel,  but  afterward  was  con- 
verted into  paraf&ne,  lubricating  oil,  aniline  dyes, 
etc.  Tanks  were  constructed  to  save  the  petro- 
leum from  running  to  waste ;  also  pipe  lines  to 
convey  it  from  the  well  to  the  seaboard,  the  lakes, 
and  elsewhere ;  also  numerous  other  economies 
were  used  in  the  production,  transportation,  and 
sale  of  the  crude  oil  and  its  products,  whereby 
the  quantity  of  labor  per  unit  of  product  has  been 
reduced  to  a  minimum,  with  the  result  that  kero- 
sene is  sold  at  retail  for  a  few  cents  a  gallon.  If 
the  members  of  the  Standard  Oil  Company  have 
extracted  their  vast  wealth  out  of  their  hired 
men,  each  of  them  must  have  been  a  spouting 
well  of  richness. 

But  in  Texas,  where  none  of  the  members  of 
the  company  reside  or  carry  on  business,  it  is 
thought  that  this  great  wealth  has  been  extracted 
out  of  the  consumer,  and  they  have  been  indicted 
there  for  feloniously  conspiring  to  keep  up  the 
price  of  kerosene  above  what  it  might  be  sold  for. 
The  Texas  consumer  considers  himself  defrauded, 
although  he  prefers  kerosene  at  its  price  to  cot- 
ton-seed oil,  lard  oil,  whale  oil,  tallow,  or  any 
other  illuminant,  and  can  buy  petroleum  at  its 
market  price  and  make  his  own  kerosene,  naphtha, 
benzine,  gasoline,  paraffine,  lubricating  oil,  ani- 
line dyes,  etc.,  if  he  chooses  to  do  so.  Texas 
being  an  agricultural  State,  the  provisions  of  its 
anti-trust  law  do  not  apply  to  the  producers  of 
agricultural  products  and  live  stock.     Any  com- 


VALUE. 


117 


bination  or  conspiracy  among  them  and  other 
like  producers  elsewhere  which  would  raise  the 
price  of  cotton,  cotton  seed,  or  steers  would  be 
hailed  there  with  delight. 

The  possession  of  property  implies  that  its 
owner  has  practiced  frugality,  for  those  who  con- 
sume or  squander  all  they  acquire  can  not  remain 
or  become  a  capitalist.  Any  one  who  makes 
savings  and  hides  them  away  gets  no  profit  out  of 
them ;  the  reward  for  his  abstinence  is  the  pro- 
vision which  he  has  made  against  sickness,  old 
age,  or  any  future  need.  Capital,  which  in  fact 
is  money,  or  money's  worth,  has  the  same  pur- 
chasing power  and  will  draw  the  same  rate  of 
interest,  whether  its  acquisition  caused  or  the 
abstinence  from  consuming  it  causes  pleasure  or 
pain.  Hired  labor  gets  the  same  wages  whether 
the  laborer  who  performs  it  loves  labor  or  hates 
it.  If  any  one  is  so  constituted  that  industry  and 
frugality,  or  either  of  them,  cause  him  great  pain, 
perhaps  those  who  practice  those  virtues  as  their 
free  choice  and  delight  ought  to  share  with  him. 

An  owner  of  capital  can  demand  a  profit  for  its 
use.  As  an  excuse  for  doing  so,  he  might  say 
that  a  loan  involves  trouble  in  the  lending  and 
securing  its  return ;  if  it  be  of  a  specific  article, 
there  is  also  its  injury  from  wear,  misuse,  and 
accident ;  if  the  thing  is  consumable,  there  is  also 
the  trouble  of  identifying  the  thing  returned  as 
an  equivalent  to  the  thing  lent ;  if  money  is  lent, 
that  offered  in   payment   may   consist  of   light. 


118 


VALUE. 


debased,  or  counterfeit  coin  or  depreciated 
paper  money ;  a  loan  without  interest  is  a  mere 
gratuity. 

Although  the  lender  demands  interest,  why 
does  the  borrower  agree  to  pay  it  ?    Some  who 
borrow  can  not  repay  the  loan  without  interest  • 
their  proper  vocation  is  to  work  for  wages,  or  at 
least  not  to  borrow.     Many  farmers  mortgage 
their  farms  and  with  the  assistance  of  their  fam- 
ilies  spend  and  fool  away  the  money,  and  thus 
often  lose  their  farms.    But  those  who  possess 
the   requisite  abilities  make  a  profit  out  of  bor. 
rowed  money  in  excess  of  interest,  some  of  them 
great  sums.    Profit  is  made  in  trade,  by  buying 
at  one  price  and  selling  for  more,  or  by  selling 
short  and  afterward  buying  back   at    a   lower 
pnce.     The  market  price  of  commodities,  includ- 
ing  all  kinds  of  negotiable  securities,  continually 
vary.     A  producer  is  a  buyer  of  materials,  instru- 
ments, etc.,  and  a  seller  of  products.    The  price  of 
cotton  varies  much  during  a  year ;  its  price  was  a 
third  higher,  on  an  average,  in  1895  than  in  1894. 
Profit  IS  made  by  paying  interest  for  money  on 
call ;  banks  do  so  continually.     Present  purchas- 
ing power  is  of  greater  value  than  the   same 
amount  certain  to  accrue  in  the  future  to  any  one 
who  can  make  a  profit  by  means  of  it  in  the  mean- 
time  ;  also,  to  any  one  who  is  without  the  means 
to  satisfy  his  present  needs.    A  nation  engaged  or 
about  to  engage  in  war,  or  has  suffered  defeat 
may  be  included  in  this  category. 


VALUE. 


119 


Money  tied  up  in  a  bag  will  not  beget  money ; 
neither  will  wheat  in  a  granary  beget  wheat, 
although  it  may  become  wormy,  grow  musty, 
or  sprout.  Locomotives,  cars,  wagons,  ships,  and 
other  useful  instruments  will  beget  nothing  except 
loss  if  allowed  to  stand  idle.  Money  is  a  pro- 
ductive instrument;  if  employed  it  can  beget 
either  a  profit  or  a  loss ;  it  can  enable  its  owner 
or  borrower  to  carry  coals  to  Newcastle,  to  sow 
seed  in  barren  ground,  or  to  produce  something 
which  is  not  wanted  or  not  in  demand  at  an 
adequate  price.  No  useful  instrument  is  pro- 
ductive of  profit  unless  it  is  intelligently  employed. 
Ships,  etc.,  can  convey  goods  from  where  they  are 
a  superfluity  to  a  place  where  they  are  wanted. 
At  Venice,  when  Antonio's  argosies  **  richly  laden 
came  to  harbor  suddenly,"  there  were  more  ducats 
in  the  cargoes  than  he  had  expended  on  them. 
The  three  thousand  ducats  enabled  Bassanio  to 
win  the  rich  heiress,  and  were  more  productive 
to  him  than  ewes  and  rams. 

A  hired  man  said  that  he  could  not  see  why 
anybody  should  make  a  profit  out  of  the  product 
of  his  labor.  In  the  first  place,  such  product  was 
not  of  his  designing  but  of  his  employer,  and  was 
worthless  if  not  wanted,  and  if  wanted  had  the 
greatest  value  where  it  was  wanted  the  most, 
which  might  be  at  Venice,  the  East  Indies,  or 
elsewhere.  Who  was  to  find  the  best  customer 
and  sell  it  to  him  ?  It  was  good  sense  for  the 
workman  to  stick  to  his  job,  take  his  reward  in 


120 


VALUE. 


VALUE. 


121 


money,  and  leave  to  his  employer  the  risk  of 
profit  or  loss  and  of  finding  the  best  customer  for 
the  product,  the  nature  of  which  was  determined 
not  by  the  workman,  but  by  his  employer. 

Great  efforts  have  been  made  to  befog  the  sub- 
ject of  interest.  For  example,  this  language  is 
quoted  :  It  is  often  said  that  capital  is  productive, 
and  so  calls  for  interest.  Obviously  capital  is 
productive  in  the  sense  that  production  is  greater 
with  than  without  capital ;  but  does  that  explain 
interest  ^  Why  should  any  one  care  for  a  plow, 
which  one  can  not  eat,  wear,  or  play  with  ?  The 
reason  is  clear :  because  it  produces  things  which 
we  can  eat,  etc.  Their  value  gives  value  to  the 
plow.  Thus  we  have  the  principle  that  the  value 
of  capital  is  a  reflected  value ;  that  is,  the  value  of 
the  means  of  production  is  derived  from  the  prod- 
uct.  But  how  much  value  will  the  plow  have? 
Suppose  it  lasts  ten  years  and  with  it  are  produced 
crops  worth  $i,ooo.  Paying  all  the  rent,  wages, 
etc..  $50  is  left  at  the  end  of  ten  years.  Now 
men  learn  to  foretell  these  results  very  closely, 
and  from  their  estimate  of  what  a  machine  will 
produce  they  determine  its  value.  If  it  will  pro- 
duce a  great  deal  they  value  it  highly ;  if  only  a 
little,  they  will  only  give  a  little  for  it,  no  matter 
how  much  or  little  it  cost  to  produce  it.  So  it 
does  not  do  to  say  that  capital  draws  interest 
because  it  produces  more  than  its  own  value,  for, 
as  we  have  seen,  it  is  valued  according  to  what  it 
produces.    ("Outlines  of  Economics,"  Ely, p.  212.) 


The  market  value  of  the  plow  is  no  more  than 
sufficient  to  induce  its  maker,  competing  with  other 
plowmakers,  to  produce  it  for  sale.  Any  more 
plows  than  he  can  use  himself  are  worthless  to 
him  except  for  the  purpose  of  sale.  A  plow  would 
have  no  other  than  its  market  value  to  a  person 
who  had  no  use  for  it  except  to  sell,  nor  to 
any  one  who  had  no  other  means  to  satisfy  his 
immediate  and  pressing  needs.  The  value  of  the 
plow  is  fixed  by  its  cost  of  production  as  above. 
Although  a  farmer  had  means  sufficient  to  satisfy 
his  wants  until  the  productive  power  of  the  plow 
became  available,  he  ought  not  to  borrow  its  price, 
with  or  without  interest,  unless  its  product 
in  ten  years,  or  during  the  life  of  the  plow, 
would  more  than  repay  the  debt.  No  one  ought 
to  buy   the  plow  at  any   price   unless  he   could 

gain  by  it. 

An  argument  against  interest  might  be  made 
as  follows :  Obviously  a  capitalist  has  a  surplus 
in  excess  of  his  current  needs ;  therefore  the  same 
amount  in  the  future  is  worth  more  to  him  than 
his  present  surplus.  A  loan  of  it  on  good  secur- 
ity, without  interest,  would  secure  him  from  loss 
by  accident,  theft,  robbery,  and  deterioration  from 
lapse  of  time,  and  relieve  him  from  all  expense, 
care,  and  trouble  of  keeping  it.  In  fact  he  would 
gain  or  save  so  much  by  lending  his  surplus  in 
that  way  until  it  was  needed  to  satisfy  his  wants, 
that  he  ought  to  pay  the  borrower  for  his  trouble. 
Money    is    often     deposited    in    bank    without 


y 


122 


VAL  UE. 


interest;  also  put  with  other  valuables  in  a 
safety  deposit  vault  and  money  paid  for  their 
safe  keeping. 

9.      NECESSARY  VALUE. 

It  is  said  (J.  S.  Mill,  B.  3,  Chap.  3):  When  the 
production  of  a  commodity  is  the  effect  of  labor 
and  expenditure  there  is  a  minimum  value  which 
is  the  essential  condition  of  its  being  permanently 
produced,  i.  e.,  its  market  value  must  be  sufficient 
to  repay  the  cost  of  production,  and   to  afford 
besides  the  ordinary  expectations  of  profit.     The 
cost  of  production,  together  with  the  ordinary 
profit,  may  therefore  be  called  the  necessary  price, 
or  value,  of  all  things  made  by  labor  and  capital ; 
that  when  the  commodity  can  be  made  by  labor 
and  capital  in  indefinite  quantity,  this  necessary 
value  is  also  the  maximum  which  its  producers 
can  expect,  if  competition  is  free  and  active,  for  a 
higher  rate  of  profit  would  stimulate  its  produc- 
tion, capital  would  rush  in  to  share  in  this  extra 
gain,  and  by  increasing  the  supply  of  the  article 
reduce  its  value ;  that  as  a  general  rule  things  tend 
to  exchange  for  one  another  at  such  values  as 
will  enable  each  producer  to  be  repaid  the  cost 
of  production  with  the  ordinary  profit ;  in  other 
words,  such  as  will  give  to  all  producers  the  same 
rate  of  profit  on  their  outlay.     But  in  order  that 
the  profit  maybe  equal  where  the  outlay— that  is, 
the  cost  of  production— is  equal,  things  must  on 
the  average  exchange  for  each  other  in  the  ratio 


VALUE. 


123 


of  the  cost  of  their  production ;  things  of  which 
the  cost  of  production  is  the  same  must  be  of  the 
same  value.  For  only  thus  will  an  equal  outlay 
yield  an  equal  return. 

According  to  this  statement,  in  Eq.  (i),  c=a 
unit  of  outlay;  x.c=total  outlay  per  unit  of  com- 
modity "a";  y.c=total  outlay  per  unit  of  com- 
modity "b."     Also, 

r=the  ordinary  rate  of  profit  on  outlay, 

r.x.c=profit  per  unit  of  '*  a," 

r.y.c=     "  "         "b," 

x.c  (i4-r)=necessary  value  of  **a*'  per  unit, 

y.c(i+r)=        "  '•  "b"    -      " 

If  m  units  of  "a"  have  the  same  market  value 
as  n  units  of  **b,"  then,  at  their  "  natural "  value, 

m.x.c  (i+r)=n.y.c  (i+r).  (6) 

Things  of  which  the  cost  of  production  is  the 
same  must  be  of  the  same  value,  and  all  producers 
make  the  same  rate  of  profit  on  their  outlay,  to 
wit,  the  ordinary  profit. 

But  the  author  cited  also  says  (J.  S.  Mill,  B.  3, 
Chap.  6):  "  Every  commodity  of  which  the  sup- 
ply can  be  indefinitely  increased  by  labor  and 
capital,  exchanges  for  other  things  proportionally 
to  the  cost  necessary  for  producing  and  bringing 
to  market  the  most  costly  portion  of  the  supply 
required.  The  natural  value  is  synonymous  with 
the  cost  value,  and  the  cost  value  of  a  thing  means 
the  cost  value  of  the  most  costly  portion  of  it." 

Therefore  the  producers  of  the  less  costly  por- 
tions of  the  supply  required  make  a  greater  rate 


124 


VALUE. 


of  profit  on  their  outlay  than^  those  who  produce 
the  most  costly  portion,  and  hence,  ♦*  as  a  general 
rule  things  do  not  even  tend  to  exchange  for  each 
other  at  such  values  as  will  give  to  all  producers 
the  same  rate  of  profit  on  their  outlay."  And  in 
order  that  the  producers  of  the  most  costly  por- 
tions of  the  supply  required  of  various  commod- 
ities  may  be  satisfied  with  the  same  rate  of  profit 
on  their  outlay,  the  production  of  them  must  be 
equally  attractive;  it  being  said  by  the  author 
cited  that  the  production  of  gunpowder  would 
require  a  greater  rate  of  profit  than  things  which 
were  not  explosive. 

The  producers  of  the  most  costly  portions  of 
the  supply  required,  and  who  stand  at  or  just 
within  the  margin  of  production,  are  not  in  a  very 
good  condition  to  rush  into  some  other  business, 
"  and  by  increasing  its  supply  reduce  its  value." 

The  proportionality  of  value  to  cost  above 
mentioned  results  in  Eq.  (6).  For  if  m  units  of 
commodity  "a"  exchange  for  n  units  of  commod- 
ity  "b,"  then  one  unit  of  "a"  buys  ^  units  of  '*b," 
and  ^  expresses  the  value  of  "a"  relative  to  **b," 
the  value  of  which  relative  to  itself  is  unity. 
Hence,  if  the  market  value  of  "a"  and  '^b"  is 
natural  as  between  them,  then,  according  to  the 
author  cited, 

5:  I  ::x.c(i+r):y.c(i+r)  (7) 

r  being  the  rate  of  profit  made  by  all  their 

producers,  according  to  one  of  his  statements,  or 


VALUE. 


125 


the  rate  of  profit  made  by  the  producers  of  the 
most  costly  portion  of  the  supply  required  of 
each,  according  to  his  other  statement. 

A  treatise  on  economics,  not  purely  specula- 
tive, ought  to  furnish  a  list  or  table  of  the  neces- 
sary value  (or  price)  of  each  commodity.  The 
rising  generation,  having  learned  (J.  S.  Mill,  B.  2, 
Chap.  1 5)  that  after  making  good  the  outlay  there 
commonly  remains  a  surplus  or  profit,  the  net 
income  from  the  capital  invested,  would  all  be 
anxious  to  know  the  amount  of  the  "ordinary 
profit "  which  he  could  spend  on  necessaries  or 
pleasures,  or  by  saving  add  to  his  wealth.  Public 
officers  and  others  who  let  contracts  ought  to 
know  what  is  the  necessary  value  of  the  thing  or 
things  contracted  for ;  so,  also,  those  who  bid  for 
the  job,  or  propose  to  produce  anything  for  sale 
or  exchange.  Unless  the  "  ordinary  profit "  is 
generally  known,  capital  and  competitors  might 
rush  in  for  an  extra  profit,  when  they  ought  to 
stay  out  and  avoid  a  loss. 

The  list  would,  however,  be  limited  to  those 
things  which  are  uniform  in  kind  and  quantity, 
and  which  are  continuously  produced  for  the  pur- 
pose of  sale  or  exchange,  for  only  such  would  have 
a  quotable  market  value. 

All  products  of  a  joint  cost  would  be  excluded 
(J.  S.  Mill,  B.  3,  Chap.  16),  for  the  cost  of  each 
would  be  unknown;  as,  for  example,  coke,  coal 
gas,  coal  tar ;  chickens  and  eggs ;  calves  and  dairy 
produce ;  beef,  hides,  tallow,  horns,  hair,  bones ; 


126 


VALUE. 


VALUE. 


127 


mutton,  mutton  tallow,  wool,  sheepskins ;  cotton, 
cotton  seed  ;  g^rain  and  straw— all  joint  products 
of  the  same  process  of  reduction,  distillation,  man- 
ufacture, the  same  course  of  husbandry,  or  of  any 
occupation  or  industry  whose  reward  is  derived 
from    more    than    one    specific    commodity.    A 
maker  of  cotton  stockings  does  not  make  them  all 
of  the  same  quality  of  cotton,  nor  all  equally  fine, 
nor  all  of  the  same  size  and  pattern.     He  endeav- 
ors to  conform  his  product  to  the  current  demand 
for  it ;  and  if  some  kinds  and  styles  prove  to  be  in 
such  demand  as  to  more  than  compensate  for  the 
loss  on  those  which  are  not  in  adequate  demand, 
he  feels  encouraged  to  continue  the  business.    A 
farmer  produces  various  things,  as  grain,  hay, 
roots,  live  stock,  etc.;  he  will  sow  grain  partly  for 
the  straw,  and  partly  in  order  to  seed  down  the 
land  to  grass ;  rotation  of  crops  is  good  husbandry. 
A  shoemaker  uses  various  kinds  and  qualities  of 
leather  and  other  materials,  and  makes  shoes  of 
various  sizes,  kinds,  and  qualities.    A   producer 
follows  an  occupation,  very  few  of  which  are  such 
that  the  product  is  some  one  thing  of  a  uniform 
kind  and  quality.    And  it  is  the  total  result*  of  his 
operations  during  a  period  of  time  sufficient,  in 
his  opinion,  to    determine  the  question  which 
induces  him  to  continue  or  to  abandon  his  occu- 
pation.   It  is  the  total  profit,  actual  or  expected, 
\yhich  determines  for  each  competitor  the  direc- 
tion of  his  competition.    Large  profits  are  often 
made  by  taking  a  very  small  rate  of  profit  per 


unit  of  outlay,  as  by  turning  over  capital  often 
during  the  period  for  which  profit  is  computed, 
or,  as  it  is  said,  by  quick  returns  and  small 
profits. 

The  author  cited  also  says  (J.  S.  Mill,  B.  3, 
Chap.  3):  **Adam  Smith  and  Ricardo  have  called 
that  value  of  a  thing  which  is  proportional  to  the 
cost  of  its  production  its  natural  value  (or  natural 
price).  They  meant  by  this  the  point  about 
which  the  value  oscillates,  and  to  which  it  always 
tends  to  return ;  the  center  value  toward  which, 
as  Adam  Smith  expressed  it,  the  market  value  of 
a  thing  is  constantly  gravitating ;  and  any  devi- 
ation from  which  is  but  a  temporary  irregularity, 
which,  the  moment  it  exists,  sets  forces  in  motion 
tending  to  correct  it.  On  an  average  of  years, 
sufficient  to  enable  the  oscillations  on  one  side  of 
the  central  line  to  be  compensated  by  those  on 
the  other,  the  market  value  agrees  with  the 
natural  value.  The  sea  everywhere  tends  to  a 
level,  but  it  never  is  at  an  exact  level ;  its  surface 
is  always  ruffled  by  waves,  and  often  agitated  by 
storms.  It  is  enough  that  no  point,  at  least  in  the 
open  sea,  is  permanently  higher  than  another. 
Each  place  is  alternately  elevated  and  depressed, 
but  the  ocean  preserves  its  level." 

Instead  of  preserving  its  level  the  ocean  con- 
tinues to  oscillate.  The  earth's  gravity  tends  one 
way ;  its  centrifugal  force  and  the  attraction  of 
the  sun  and  moon  another.  Heat  and  cold  cause 
vast  currents  to  flow  to  and  from  the  poles,  which 


128 


VALUE. 


r 


are  turned  aside  by  obstructions  and  the  forces 
which  operate  upon  the  water;  the  pressure  of 
the  air  does  not  remain  uniform  everywhere,  and 
the  shifting  winds  not  only  ruffle  the  surface  of 
the  water,  but  disturb  its  level.  It  would  have 
been  more  accurate  to  say  that  the  oscillations  of 
the  water  occur  within  certain  variable  limits  at 
which  the  various  forces  counteract  each  other. 
In  order  that  the  ocean  may  be  level,  no  part 
or  parts  of  it  must  be  higher  than  others ;  so  also 
as  to  natural  value,  which,  in  order  to  be  natural, 
must  be  so  as  to  all  commodities  at  the  same 
time. 

Although  the  oscillations  in  market  value  may 
compensate  for  one  another  on  an  average  of 
years,  as  above  stated,  that  fact  does  not  help 
those  who  are  engaged  in  or  who  begin  business 
when  the  oscillation  is  going  the  wrong  way  for 
them.     The  '*  ordinary  profit  "  on  the  most  costly 
portion  of  the  supply  required  of  the   various 
commodities  is  not  so  great  as  to  enable  them  to 
keep  their  heads  above  water  until   it  sets  the 
other  way.     During  the  lapse  of  years  many  pro- 
ducers  of  the  most  and  of  the  less  costly  parts  of 
the  several  supplies  will  die,  alter  their  business, 
or  step  out  of  the  competition,  and  newcomers 
will  take  part  in  it ;  the  relative  demand  will  vary, 
and  also  the  conditions  of  production.   A  compen' 
sation  which  occurs  only  in  an  average  of  years 
can  help  those  only  who  are  long-lived  and  long- 
winded.     In  relative  value,  while  one  or  more 


VALUE. 


129 


things  are  going  down,  another  or  others  are 
going  up ;  hence  it  would  add  greatly  to  the  prac- 
tical value  of  this  central  line  if  it  were  located 
so  that  everyone,  and  especially  every  new  begin- 
ner, might  enter  into  the  swim  at  the  right  place 
or  at  the  right  time. 

The  theory  of  natural  value,  above  considered, 
ignores  human  inequality  and  assumes  that  all 
products  are  uniform  in  quality.  All  the  hunters, 
fishermen,  and  other  producers  are  all  exactly 
alike ;  so  also  are  all  the  deer,  beaver,  fish,  and  other 
products.  With  equal  facilities  all  producers  can 
produce  the  same  thing  at  the  same  cost  and  make 
the  same  profit.  The  theory  does  not  apply  to  a 
state  of  industrial  freedom  and  of  free  competi- 
tion among  unequals. 

It  is  only  in  socialism  that  every  person  will 
produce  and  procure  the  same  thing  at  the  same 
cost.  In  that  Utopia  all  men  will  be  considered 
to  be  exactly  alike ;  no  kind  of  labor  will  be  con- 
sidered more  arduous  or  disagreeable  to  one  per- 
son than  to  another.  Every  unit  of  labor  time 
will  draw  from  the  common  stock  the  same  quan- 
tity of  commodity,  which  will  be  uniform  in 
quality,  or  so  considered,  and  none  of  it  be  stale, 
musty,  mildewed,  worm-eaten,  inferior,  or  unequal 
in  any  respect.  All  the  beef  will  be  from  cattle 
that  are  all  equally  young,  healthy,  and  fat,  and  be 
all  tenderloin  and  fine  cuts ;  all  the  honey  in  the 
hive  will  be  of  new  white  comb,  and  none  of  it 
will  be  old,  webbed  over  by  the  moth,  or  partly 

9 


130 


VALUE, 


II 


ii 


% 


occupied  by  young  bees.  Everjlhing  will  be  de- 
livered over  to  consumers  at  the  same  price  per 
unit  of  quantity,  and  none  of  it  offered  to  the 
highest  bidder  and  sold  according  to  its  quality. 

It  has  been  said  (Caimes)  that  the  normal  or 
natural  value  of  a  commodity  is  that  which  will 
suffice,  and  no  more  than  suffice,  to  yield  its  pro- 
ducers what  is  considered  to  be  the  average  or 
usual  remuneration  for  such  sacrifices  as  they 
undergo.  But,  under  free  competition,  every 
competitor  does  the  considering  for  himself ;  and 
the  value  of  his  product  for  a  period  by  him 
deemed  sufficient  for  the  purpose  must  yield  him 
at  least  as  good  a  reward  as,  in  his  opinion,  he  can 
otherwise  obtain,  or  else  he  will  change  his  occu- 
pation, whether  his  remuneration  is  above  or  be- 
low the  average. 

When  ever}'  competitor  has  no  cause  to  change 
his  occupation,  it  may  be  said  that  competition 
has,  at  least  theoretically,  ceased  to  operate  and 
the  relative  value  of  commodities  are  in  equi-' 
librium,  although  all  producers  were  making  a 
different  rate  of  profit  on  their  outlay. 

VII. 

MONEY   VALUE. 

The  money  vaitie  of  a  thing  is  its  relative  value 
as  compared  with  money,  and  in  amount  is 
expressed  by  the  number  of  units  contained  in 


VALUE. 


131 


the  sum  of  money  which  it  is  deemed  worth  or 
for  which  it  is  sold.  The  exchange  value  of  the 
money  unit  is  the  unit  of  money  value.  All  of 
the  units  being  alike,  are  of  the  same  value  ;  for 
if  not  alike  they  can  not  be  added  together  into 
an  aggregate  ;  but  being  so,  there  are  as  many 
units  of  money  value  in  a  sum  of  money  as  there 
are  money  units.  Thereupon,  sums  of  money 
and  amounts  of  money  value  can  be  stated  in 
figures  and  become  amenable  to  the  rules  of  arith- 
metic. Accounts  can  be  kept  in  terms  of  the 
money  unit ;  all  taxes,  dues,  debts,  damages,  cost, 
and  value  can  be  so  stated.  Market  prices  of  all 
commodities,  being  of  the  same  nature,  can  be 
compared  with  each  other,  and  the  relative  value 
of  commodities  thereby  ascertained ;  in  fact,  their 
relative  market  value  is  not  otherwise  ascer- 
tainable. 

Barter  is  the  direct  exchange  of  commodities 
between  their  respective  owners.  In  barter  each 
party  must  have  something  which  the  other  wants 
more  than  what  he  then  has,  and  the  commodities 
must  be  divisible  so  as  to  form  a  basis  of 
exchange  which  will  be  satisfactory  to  both  par- 
ties. But  ordinary  commodities  are  bulky,  more 
or  less  perishable,  and  usually  suitable  only  for 
some  particular  purpose,  are  consumed  by  their 
use,  and  have  no  general  purchasing  power.  The 
number  of  ratios  arising  from  the  direct  exchange 
of  loo  commodities  is  4,950 ;  of  200  commodities 
is  19,900,  supposing  each  of  them  to  be  exchanged 


i 


132 


VALUR 


for  each  of  the  others  and  always  at  the  same 
ratio.  But  they  would  not  always  exchange  at 
the  same  ratio,  and  many  of  them  would  rarely, 
if  ever,  directly  exchange  for  each  other,  as 
feathers  for  railroad  iron,  or  axle  grease  for  mil- 
linery. Value  would  not  be  easy  to  state  in 
accounts ;  also  debts  and  credits,  if  they  existed. 
A  theory  of  exchange  value  founded  on  barter, 
which  assumes  that  every  commodity  is  uniform 
in  quality,  durable,  and  has  a  general  purchasing 
power,  is  based  on  a  fiction.  Where  division  of 
labor  exists,  and  every  producer  relies  upon  his 
product  as  a  means  to  acquire  from  others  many 
of  those  things  which  he  needs,  no  one  could 
obtain  them  by  barter,  in  kind,  quantity,  when 
wanted,  and  on  terms  which  would  enable  him  to 
pursue  his  occupation  successfully;  too  much 
of  his  time  would  be  occupied  in  truck  and  trade  ; 
those  who  want  his  product  are  seldom  those  who 
can  supply  him  with  what  he  requires.  A  baker 
needs  from  time  to  time  a  certain  quantity  of 
flour  of  a  suitable  quality ;  those  who  want  some 
bread  at  stated  intervals  can  not  supply  him  with 
flour.  A  miller  wants  grain,  but  the  farmer  wants 
other  things  besides  bread  or  flour  for  his  surplus 
crop.  What  everyone  wants  in  exchange  for  his 
superfluities  is  general  purchasing  power  in  a 
concrete,  durable,  portable,  and  divisible  form, 
which  he  can  from  time  to  time,  and  at  any  time, 
use  to  acquire  by  purchase  what  ever  he  may  need 
or  desire ;  he  also  wants  to  sell  at  the  highest 


I 


VALUE. 


133 


price  obtainable  and  buy  at  the  lowest ;  as  a  seller 
he  wants  competition  among  buyers ;  and,  as  a 
buyer,  competition  among  sellers.  In  fact,  the 
relative  value  of  commodities  is  properly  fixed  by 
competition  in  their  sale  as  well  as  in  their 
production. 

Money  enables  everyone  to  sell  his  superflui- 
ties to  those  who  want  them  the  most,  and  to 
acquire  his  necessaries  from  those  who  want  them 
the  least ;  to  do  this,  he  sells  to  one  person  or  set 
of  persons,  and  buys  of  another. 

During  the  fiscal  year  ending  June  30,  1 889, 
about  one-half,  in  money  value,  of  the  exports 
from  this  country  went  to  Great  Britain,  while 
only  about  one-quarter  of  the  imports  came  from 
there.  The  exports  to  and  imports  from  the  fol- 
lowing countries  were,  in  money  value,  as  fol- 
lows: 


Brazil 

Cuba 

China 

Philippine  Islands 


Exports. 


$  9.35i»o8i 

11,691,311 

2,791,128 

179.647 


Imports. 


$60,403,804 
52,130,623 
17,028,412 
10,593.172 


The  exports  were  sold  where  they  would  bring 
the  best  price,  and  the  imports  were  bought 
where  they  could  be  obtained  at  the  lowest  price. 
How  this  could  be  done  by  way  of  barter,  and  how 
international  balances  could  be  stated  and  paid  by 
the  use  of  that  method  of  exchange,  is  hardly 
worth  while  to  consider.    Even  if  the  money  of  a 


134 


VALUE. 


country  consists  of  an  irredeemable  and  fluctuat- 
ing paper  currency,  trade  is  not  carried  on  with  it 
by  way  of  barter. 

An  exporter  is  one  person  and  an  importer  is 
usually  another ;  the  former  may  sell  on  one  side 
of  the  globe,  and  the  latter  buy  on  the  opposite 
side;  each  of  them  buys  and  sells  for  money, 
unless  in  dealing  with  savages.  A  merchant  con- 
tinually buys  of  one  set  of  persons  and  sells  to 
another.  A  producer  buys  his  materials  and 
implements  from  sundry  persons  and  sells  his 
product  to  others.  A  farmer  sells  his  surplus 
grain,  live  stock,  and  other  produce  to  various 
persons,  buys  his  dry  goods,  groceries,  and  other 
necessaries  of  others,  pays  his  taxes,  his  doctor, 
lawyer,  clerg)anan,  the  schoolmaster,  etc.,  and,  if 
thrifty,  has  some  money  left,  which  he  may  not 
use  or  spend  for  years.  He  would  be  no  wiser 
if  he  were  informed  that  his  transactions  really 
amounted  to  barter.  A  person  can  sell  more 
goods,  in  value,  than  he  buys ;  but  he  can  not 
continue  to  buy  more  than  his  means  will  pur- 
chase. The  people  of  Great  Britain,  having  large 
investments  in  their  colonies,  India,  and  else- 
where, are  enabled  to  buy  continually  more  than 
they  sell.  The  annual  income  from  British  capi- 
tal  invested  abroad  is  said  to  exceed  eighty-five 
millions  of  pounds  sterling  ('*The  Growth  of  Capi- 
tal," Giffen). 

In  that  rude  state  of  society  to  which  barter 
properly  belongs,  some  commodity  was  usually 


:'    I 


VALUE, 


135 


found  to  have  a  more  general  purchasing  power 
than  any  other,  whereupon  it  came  to  be  used  as 
a  crude  and  imperfect  money.  Many  things  have 
been  so  used  at  different  times  and  places,  among 
others,  cattle,  sheep,  grain,  skins,  and  furs.  But 
cattle  and  sheep  may  be  large  or  small,  young  or 
old,  fat  or  lean,  sound  or  unsound ;  grain,  skins, 
and  furs  also  vary  in  quality.  Money  ought  not 
to  require  to  be  fed,  watered,  and  perhaps  doctored, 
or  be  liable  to  die,  decay,  become  musty,  or  in- 
fected with  weevil,  moth,  and  vermin.  No  com- 
modity is  suitable  for  the  purpose  unless  it  is 
uniform  in  quality,  durable,  portable,  divisible 
into  parts  without  injury,  limited  in  quantity  and 
always  in  general  demand. 

When  the  metals  became  known,  they  were  used 
for  the  purpose,  and  finally  the  precious  metals 
were  preferred  to  anything  else.  After  they  be- 
came known  and  available  for  the  purpose,  the 
owners  of  superfluous  commodities,  which  are 
usually  bulky,  perishable,  expensive  to  keep  and 
carry,  preferred  to  sell  hem  for  precious  metal, 
feeling  sure  that  it  would  remain  sound  and  in 
general  demand  until  they  severally  saw  fit  to  dis- 
pose of  it  from  time  to  time  as  their  needs  might 
require.  By  so  doing  they  acquired  and  still 
acquire  a  store  of  wealth  in  a  concentrated,  dura- 
ble, and  divisible  form,  with  a  great  saving  in 
value  and  in  cost  to  them.  Such  money  has  a 
general  purchasing  power,  present  and  prospec- 
tive.   The  money  of  international  trade  is  prec- 


136 


VALUE, 


iotis  metal  treated  as  bullion,  estimated  according 
to  its  weight  and  fineness. 

Coinage  fits  the  metal  for  use  as  money,  and  is 
done  by  the  State  according  to  a  money  system 
with  which  its  people  are  familiar.    The  metal  is 
reduced  to  a  uniform  fineness  called  standard,  as, 
for  example,  nine-tenths  pure  metal  and  one-tenth 
of  a  prescribed  alloy.    This  obviates  all  questions 
as  to  its  fineness,  and  makes  equal  quantities  of  it 
by  weight  of  equal  value.    A  fixed  quantity  of  it 
by  weight  is  taken  as  the  money  unit,  to  which  a 
name  is  given,  as  a  dollar,  a  sovereign,  a  mark,  a 
franc,  etc.     Thereupon  the  standard  bullion  is 
coined  into  multiples  and  submultiples  of  the 
money  unit,  each  of  a  weight  proportionate  to  its 
nominal  value  in  the  money  system  to  which  it 
belongs.     This  being  done,  any  sum  of  money 
stated  in  terms  of  such  unit  contains  a  quantity 
of  the  metal    in  proportion  to  the  number  of 
money  units  contained  in  such  sum,  and  with  the 
requisite  number  of  pieces,  or  coins,  any  such 
sum  can  be  counted  out  in  them  without  any  divi 
sion  of  metal  or    further   ascertainment  of  its 
weight  and  fineness,  assuming  them  to  be  gen- 
uine, undebased,  and  unimpaired  by  use  or  fraud. 
If  coinage  is  free  and  gratuiotus,  the  coins,  exe- 
cuted as  above,  and  therefore  called  standard 
coins,  are  merely  the  standard  metal  put  into  a 
form  most  suitable  and  convenient  for  use  as 
money,  and  their  exchange  value  conforms  to  that 
of  the  same  weight  of  standard  bullion. 


VALUE. 


137 


Each  of  the  precious  metals  is  uniform  in  qual- 
ity and  makes  a  homogeneous  currency ;  each  of 
its  units  are  alike  and  of  the  same  value,  and 
therefore  a  sum  of  money  can  be  stated  in  terms 
of  the  money  unit.  But  bimetallism,  or  the  free 
and  gratuitous  coinage  of  both  metals  at  a  fixed 
ratio  between  them,  to  wit,  that  the  silver  coins,  per 
money  unit,  shall  be  in  pure  silver  a  specific  num- 
ber of  times  heavier  than  the  gold  coins  are  in  pure 
gold,  fails  to  make  a  homogeneous  currency ;  for 
the  relative  market  value  of  the  two  metals  will 
not  remain  the  same  as  their  coinage  ratio,  and 
the  difference  in  bulk  and  weight  of  the  two  kinds 
of  coin  prevent  them  from  being  equally  desirable 
in  all  sums. 

If  a  money  coined  out  of  either  metal  remains 
unaltered  in  fineness  and  its  unit  unaltered  in 
weight,  every  person  who  buys  or  sells,  borrows 
or  lends,  in  terms  of  such  unit,  knows  what  is  to 
be  paid  or  received  just  the  same  as  in  a  contract 
to  deliver  or  receive  a  specific  amount  of  any 
other  commodity  of  a  uniform  quality.  A  super- 
structure of  credit  can  be  erected  upon  such  a 
solid  foundation,  for  everyone  knows  what  is 
meant  by  a  sum  of  money  stated  in  money  units. 
What  the  exchange  value,  or,  in  other  words,  the 
general  purchasing  power,  of  a  sum  of  money,  or 
of  a  certain  quantity  of  any  other  commodity, 
may  be  in  the  future,  no  one  can  foretell ;  as  to 
that,  everyone  must  take  the  risk.  Prices  and  the 
relative  value  of  commodities  can  not  be  fixed  by 


138 


VALUE. 


law  so  as  to  suit  both  the  buyer  and  the  seller, 
the  producer  and  the  consumer.  The  demand  rela- 
tive to  the  supply  of  anything  does  not  remain 
constant,  nor  does  its  cost  of  production  or  acqui- 
sition. But  with  a  metallic  currency  as  above 
supposed,  the  money  and  relative  value  of  com- 
modities would  conform  to  the  varying  relative 
demand  for  them  at  the  varying  relative  cost  of 
their  production. 

The  relative  value  of  the  two  metals  has  varied 
one-half  since  1873,  to  wit :  An  ounce  of  fine  gold 
had  the  same  exchange  value  as  15.92  ounces  of 
fine  silver  in  1873,  and  of  about  double  that  quan- 
tity in  1 897. 

The  annual  supply  of  both  metals  has  been 
large  and  increasing  for  a  number  of  years  (Re- 
port of  the  Director  of  the  Mint  for  1896,  p.  232)^ 
which  proves  that  each  of  them  is  produced  at  a 
profit  sufficient  to  induce  and  encourage  its  pro- 
duction. 

The  change  in  their  relative  value  has  been 
quite  gradual  since  1873,  and  affords  no  sufficient 
reason  why  a  country  which  then  had,  and  still 
has,  either  a  gold  or  a  silver  standard  should  now 
alter  it;  for  the  relative  value  of  commodities 
under  either  standard  conforms  to  the  variation 
in  their  relative  cost  of  production  or  acquisition. 
Gold  is  greatly  superior  to  silver  as  a  metal,  and 
has  been  preferred  more  and  more  for  use  as 
money  ever  since  1873.  Silver  has  also  been 
greatly  supplanted  in  the  industrial  arts  by  elec- 


VALUE, 


\m 


troplate,  German  silver,  and  other  alloys  of  the 
baser  metals. 

If  bimetallism  were  beneficial  its  adoption  at 
the  existing  commercial  ratio  would  cause  the 
least  disturbance  to  prices  and  values.  The  adop- 
tion of  the  free  coinage  of  gold  at  the  ratio  of  1 5  J^ 
or  16  to  I  by  a  silver  standard  country  would  be 
nugatory ;  its  adoption  by  a  gold  standard  coun- 
try would  debase  its  unit  of  cost  and  value  to  the 
bullion  value  of  the  silver  contained  in  its  money 
unit.  But  its  general  adoption  by  all  or  the  princi- 
pal gold  standard  countries,  if  made  effectual,  it  is 
insisted,  would  cause  the  relative  value  of  the  two 
metals  to  conform  to  their  coinage  ratio  by  mak- 
ing the  relative  demand  for  them  conform  to  that 
ratio.  The  scheme  has  for  its  object  to  raise  the 
exchange  value  of  silver  and  depress  that  of  gold  ; 
to  stimulate  the  production  of  the  former  and  dis- 
courage the  production  of  the  latter.  The  silver 
producers  are  its  chief  advocates,  aided  and 
assisted  by  debtors  and  speculators  in  gold  stand- 
ard countries  who  expect  to  gain  by  an  upheaval 
and  alteration  in  values,  caused  by  making  money 
more  abundant  and  of  less  value  per  unit.  Some 
countries  which  hold  a  large  stock  of  silver,  coined 
formerly  at  the  ratio  of  155^  or  16  to  i,  being 
somewhat  in  the  condition  of  the  fox  in  the  fable 
who  had  lost  his  tail,  are  inclined  to  regard  the 
above  scheme  with  an  eye  of  favor. 

Metallic  Tokens.     Some  of  the  coins,  as  for  the 
fractional  parts  of  the  money  unit,  if  made  of  the 


i 


u 


140 


VALUE. 


Standard  metal,  would  be  too  small  for  convenient 
use,  and  are  usually  made  of  baser  metal,  with  a 
nominal  or  money  value  assigned  to  them  greater 
than  their  metallic  value.  Such  coins  are  neces- 
sary in  retail  trade  and  to  pay  the  fractional  parts 
of  the  money  unit.  A  newspaper  could  not  be 
bought  for  a  cent  if  there  were  no  cents.  These 
coins  are  called  tokens.  Their  coinage  is  limited 
to  the  amount  required,  is  done  on  Government 
account,  and  their  legal  tender  power  is  limited 
to  a  small  sum  in  any  one  payment.  Such  coins 
are  necessary  for  change,  but  they  become  a 
nuisance  when  they  are  in  excess  of  the  amount 
required,  wherefore  they  are  made  redeemable 
at  the  Treasury,  and  when  wanted  are  obtainable 
there  for  other  money. 

Paper  Tokens,  Paper  money  is  token  or  repre- 
sentative money,  and  properly  consists  of  prom- 
ises to  pay  money  to  the  bearer  on  demand, 
executed  on  paper  in  such  form  and  in  such 
amounts  as  to  be  suitable  for  general  circulation 
as  a  substitute  or  token  for  the  money  thereby 
promised  to  be  paid.  This  token  takes  the 
place  of  the  coin  which  it  represents,  and  thereby 
reduces  to  the  extent  of  its  nominal  value  the 
amount  of  coin  which  would  otherwise  be  current. 

The  legitimate  demand  for  paper  money  is  not 
a  demand  for  more  money,  but  for  that  kind 
because  of  its  superiority  over  coin  for  common 
use  in  active  circulation.  Standard  coin  is  sub- 
ject to  the  objections  of  bulk,  weight,  and  wear. 


VALUE. 


141 


Paper  money  is  light,  easy  to  count,  carry  and 
conceal  about  the  person,  and  always  requires  for 
its  redemption  coin  of  full  weight. 

The  power  to  coin  money,  to  alter,  debase,  and 
dilute  it,  is  an  attribute  of  sovereignty,  to  be  exer- 
cised solely  for  the  public  good,  and  not  for  pri- 
vate  gain.  Hence  the  State  ought  to  furnish  all 
the  money.  Any  gain,  saving,  or  profit  arising 
from  the  manufacture  and  issue  of  metallic  and 
paper  tokens  belongs  exclusively  to  the  people  as 
represented  by  the  State.  No  person  or  corpo- 
ration  should  be  authorized  or  permitted  to  make 
and  put  in  circulation  any  kind  of  money.  Banks  of 
issue  and  bogus  mints  ought  to  be  alike  prohibited. 

The  fineness  of  the  standard  metal,  the  weight 
of  the  standard  coins,  and  even  of  the  metallic 
tokens,  are  fixed  with  great  precision,  and  abun- 
dant provision  is  made  for  the  execution  of  the 
coinage  conformable  thereto ;  also,  the  coinage  of 
the  standard  metal  is  made  free  and  gratuitous  in 
order  that  the  standard  coins  shall  have  the  same 
exchange  value,  per  unit  of  weight,  as  the 
uncoined  metal.  Thereupon  the  money  and  its 
value  are  as  stable  and  as  elastic  as  the  metal  and 
its  value,  and  all  attempts  to  make  the  former 
more  so  violate  the  theory  of  free  coinage  and 

nullify  its  object. 

Metallic  and  paper  tokens  issued  solely  for  the 
purpose  of  obviating  the  practical  objections  to 
the  exclusive  use  of  the  standard  metal,  and  made 
always  redeemable  at  the  National  Treasury  and 


142 


VALUE. 


I' 

I! 
1  ( 

1 


its  offices,  would  not  alter  the  nature  of  the  cur- 
rency, and  would  leave  its  value  per  unit,  the 
same  as  if  it  were  exclusively  of  standard  coin. 

The  Currency  Volume,  The  amount  of  money 
needed  for  active  circulation  depends  upon  the 
quantity  of  business  to  be  transacted  and  the 
manner  of  doing  it.  A  commercial  community 
would  require  more  money  for  this  purpose,  per 
unit  of  population,  than  if  it  were  agricultural. 
Also,  when  transactions  of  any  magnitude  are 
chiefly  effected  by  checks  and  other  ordinary 
instruments  of  credit,  the  quantity  of  money 
required  is  much  less  than  if  it  were  counted  out, 
examined,  and  paid  over  in  every  transaction. 

But  money  is  not  wanted  merely  for  immediate 
but  also  for  future  use,  more  or  less  remote.  The 
money  held  in  reserve  for  future  use  is  as  much 
a  part  of  the  currency  as  that  which  is  paid  away 
as  soon  as  it  is  received.  For  savings,  reserves 
and  future  use,  gold  coin  is  preferred.  Such 
money  encourages  frugality  and  promotes  the 
growth  of  capital;  war,  civil  commotion,  or  finan 
cial  panic  does  not  destroy  its  value.  The  finan- 
cial condition  of  a  country  is  strong  when  it  is 
saturated  with  specie.  Then  the  exportation  of  a 
few  millions  would  excite  no  fear  about  the  stability 
of  the  currency,  such  as  continually  arises  when  it 
consists  chiefly  of  paper  money  and  other  tokens. 
The  people  of  France  paid  a  thousand  millions  of 
dollars  to  Germany,  when  overrun  by  its  armies, 
without  a  financial  collapse. 


VALUE. 


143 


The  nominal  amount  of  a  metallic  currency 
also  depends  on  the  kind  of  metal  used  and  the 
weight  of  the  money  unit.  For  example,  if  the 
weight  of  the  money  unit  were  reduced  one-half, 
the  nominal  amount  of  the  currency  would  be 
doubled. 

A  metallic  currency  whose  standard  coin  and 
money  unit  remain  unaltered  in  weight  and  fine- 
ness, is  automatic  in  its  volume.  As  prices  rise 
the  exchange  value  of  money  falls,  and  exporta- 
tion of  it  occurs  when  it  can  be  done  at  a  profit. 
As  prices  fall,  the  exchange  value  of  money  rises, 
and  coin  previously  exported  is  imported,  or  bul- 
lion is  procured  and  coined  when  it  can  be  done 
at  a  profit.  Precious  metal,  in  coin  or  bullion, 
like  any  other  commodity,  is  exported  when  in 
superfluity  and  procured  in  the  opposite  case. 

If,  instead  of  allowing  a  metallic  currency  to 
correct  itself  automatically,  money  is  kept  too 
abundant  by  issues  of  paper  money ,  the  final  result 
is  the  total  expulsion  of  the  standard  coin ;  after 
which  the  paper  money,  being  non-exportable  and 
irredeemable,  declines  in  value  as  its  quantity 
increases,  until  its  value  becomes  nominal,  as 
Continental  money,  assignats.  Confederate  money. 

A  gold  currency  may  also  be  debased  by  the 
free  and  gratuitous  coinage  of  silver  at  a  nominal 
or  legal-tender  value  in  excess  of  its  bullion 
value,  or  gold  price.  In  such  case,  silver  bullion 
can  be  coined  at  a  profit  until  the  abundance  of 
money  and  the  consequen  rise  in    prices  cause 


144 


VAL  UE. 


the  silver  coins  to  fall  to  their  bullion  value 
Pnor  to  which  time  the  gold  coins,  being  worth 
more  as  bullion  than  their  nominal  or  money 
value,  are  exported  or  otherwise  disappear  from 
circulation.  After  the  silver  coins  fall  to  their 
value  for  export  as  bullion,  the  currency  could  not 
be  further  inflated  except  by  debasing  them,  or  by 
issues  of  paper  money  as  above  stated. 

According  to  the  report  of  the  Director  of  the 
Mint  for  1896,  p.  226,  the  gold  produced  in  the 
'United  States  previous  to  1896  amounted,  in  coin- 
ing value,  to  $2,059,946,769 ;  to  which  add  his  esti- 
mate for  1896,  to  wit,  $51,500,000,  and  the  total 
product  up  to  1897  was  $2,111,446,769.    Also,  p. 
281,  the  total  gold  coinage  at  the  mints  of  the 
United  States  up  to  July  i,  1896,  was  $1,814,692,. 
253,  which  is  greater  than  the  total  currency  of 
the  United  States  at  that  date,  which,  as  given  by 
the  Treasury  Department,  was  $1,776,817,488  of 
which   only  $567,931,823  was   in  gold   coin,    the 
residue  consisting    of    various    kinds   of    paper 
money  and    of  silver    tokens.      The   difference 
between  the  product  and  the  coinage  may  be 
taken  as  equal  to  the  quantity  of  gold  used  in 
the  industrial  arts,  supposing  all  old  material  to 
be  reemployed  for  that  purpose.     It  is  obvious, 
therefore,  that  the   entire  currency  might  have 
been  in  gold  coin,  without  importing  any  of  that 
metal.    In  such  case,  the  preference  for  paper 
money  over  coin  for  use  in  active  circulation 
could  have  been  satisfied  by  the  issue  from  the 


VALUE. 


145 


Treasury  of  gold  certificates  for  a  like  amount  in 
gold  coin  deposited  and  there  held  for  their 
redemption.  Thereupon  the  currency  and  its 
proportionate  parts,  as  between  coin  and  paper, 
would  have  been  automatic.  The  annual  domes- 
tic product,  which  is  large  and  increasing, 
to  wit,  $46,610,000  in  1895,  and  $51,500,000  in 
1896,  after  deducting  the  quantity  of  new  gold 
required  for  use  in  the  industrial  arts,  would 
have  supplied  any  future  increase  in  the  cur- 
rency demanded  by  an  increase  in  the  population 
or  other  cause. 

But  the  currency  of  the  United  States  consists 
of  about  one-third  in  standard  gold  coin  and  two- 
thirds  in  paper  and  other  tokens.  In  addition  to 
all  the  foreign  gold  imported,  there  was  exported 
previous  to  July  i,  1896,  about  $1,200,000,000  of 
the  domestic  product.  The  net  export  of  the 
United  States  gold  coin  from  January  i,  1870,  to 
November  i,  1896,  was  $576,494,360  (Mint  report 
for  1896,  p.  32).  To  this  add  the  net  export  of 
foreign  gold  coin  and  of  domestic  and  foreign 
bullion.  The  net  export  of  gold  for  the  fiscal 
year  ending  June  30,  1896,  was  $78,904,612;  for 
the  fiscal  year  ending  June  30,  1895,  was  $30,117,- 
376  (lb.).  Gold  is  exported  persistently  as  above, 
because  the  volume  of  the  currency  has  been  in 
time  past,  and  still  is,  kept  stuffed  with  paper  and 
other  tokens.  "  When,  during  a  period  of  appre- 
hension, caused  by  a  large  efflux  of  gold  from 

England  to  America,  views  were  expressed  in 
10 


146 


VALUE. 


'i* 


Manchester  and  Liverpool  that  a  much  larger 
issue  of  bank  notes  ought  to  be  permitted,  this 
opinion  tended  manifestly  to  the  depreciation  of 
our  currency."  (Goshen's  "  Foreign  Exchanges," 
p.  74-) 

If  the  free  coinage  of  silver  were  adopted  at 
the  ratio  of  i6  to  i,  which  is  about  twice  its  com- 
mercial value,  all  of  the  gold  coin,  and  gold  not 
used  in  the  industrial  arts,  would  be  exported, 
except  what  might  be  hoarded.  And  thereupon 
the  currency  would  become  one  consisting  of  sil- 
ver  dollars  and  paper  tokens  redeemable  in  silver 
dollars.  Only  about  $60,000,000  of  silver  dollars 
is  all  that  can  be  kept  in  circulation  in  specie ; 
any  excess  over  this  amount  is  returned  to  the 
Treasury'  and  silver  certificates  taken  out  for  it. 
After  such  a  currency  was  inflated  to  the  export- 
ing point  for  the  silver  coin,  and  prices  had 
become  adjusted  to  the  silver  dollar  as  the  money 
unit,  and  debts  had  been  incurred  on  that  basis, 
the  chronic  complaint  about  the  scarcity  of  money 
would  be  heard,  unless  the  exchange  value  of  sil- 
ver continued  to  decline,  prices  to  rise,  and  debts 
to  dwindle. 

The  State  has  power  to  alter  the  money  and 
its  unit,  so  that  a  sum  of  money  payable,  e.  g.,  in 
dollars  is  payable  in  any  kind  of  dollars  which  is 
a  legal  tender  at  the  time  of  payment.  In  addi- 
tion to  the  natural  and  unavoidable  causes  of 
variation  in  money  value,  everyone  must  take 
the  additional  risk  of  variation  caused  by  an  alter- 


VALUE. 


147 


ation  in  the  money.  Such  alterations  may  be 
justified  by  necessity  or  other  reasons  of  State 
almost  equally  cogent. 

Many  people,  who  would  be  startled  by  legal- 
ized alterations  in  other  commodities  and  their 
units  of  measure,  think  that  alterations  in  money 
so  as  to  make  it  more  abundant  and  less  valuable, 
is  quite  the  correct  thing  to  do;  it  helps  the  debtor 
and  speculator  and  is  said  to  give  "a  fillip  "to 
business;  it  is  always  practicable,  for  creditors 
can  be  compelled  to  accept  the  inferior  article  and 
are  then  in  no  condition  to  cry  stinking  fish.  To 
refuse  the  free  and  gratuitous  coinage  of  silver 
dollars  out  of  metal  worth  half  their  nominal  and 
legal-tender  value  was  said  by  the  cheap-money 
candidate  for  the  Presidency  in  1 896,  to  shut  the 
gates  of  mercy  on  mankind.  The  gates  could 
have  been  kept  open  quite  as  easily  by  debasing 
the  gold  coin  one-half,  and  more  easily  by  liberal 
issues  of  paper  money,  as  desired  by  the  Populists. 
But  neither  of  these  methods  would  have  suited 
the  silver  producers  or  been  supported  by  the 
votes  of  the  silver  States.  To  alter  money  and 
its  value  by  debasing  the  coin,  or  by  substituting 
a  cheaper  metal,  is  an  antiquated  method  involv- 
ing time  and  expense.  The  French  livre  was 
originally  a  pound  of  silver,  but  finally  contained 
only  about  seventy  grains  troy,  but  it  took  a  long 
time  to  do  this.  To  inflate  and  depreciate  a  cur- 
rency with  paper  money  is  more  adroit,  and  can 
be  done  quickly  and  cheaply ;  paper  money  can 


148 


VALUE, 


be  produced  at  once  to  an  unlimited  amount  at  a 
merely  nominal  cost. 

Alterations  in  money  cause  the  standard  of 
cost  and  value  to  become  fallacious.  The  differ- 
ence is  not  readily  perceived  by  everybody; 
prices  alter,  but  the  cause  is  not  referred  to  the 
alteration  made  in  the  money.  During  the  war  of 
secession,  accounts  were  kept  and  prices  stated  in 
dollars  as  before,  but  they  were  paper  dollars. 
During  July,  1864,  the  value  in  paper  dollars  of  a 
dollar  in  gold  varied  between  the  extreme  limits 
of  $2.85  and  $2.22.  After  the  war  ended,  as  the 
quantity  of  paper  money  was  reduced,  it  was  said 
gold  fell  in  price.  The  prices  and  relative  value 
of  commodities  did  not  at  once  and  uniformly 
respond  to  the  change.  Some  things  rose  faster 
or  sooner  than  others  during  the  expansion,  and 
some  things  fell  sooner  or  faster  than  others  dur- 
ing the  contraction  of  the  currency. 


VIII. 


AMERICAN    CURRENCY. 


A  brief  history  of  the  money  of  this  country 
furnishes  a  practical  illustration  of  the  subject  of 
money  and  money  value. 

Colonial  money  was  expressed  in  £,  s.  d.,  or 
pounds,  shillings,  and  pence.  But  this  is  money 
in  the  abstract,  ideal  money,  or,  as  it  is  called, 


VALUE, 


149 


money  of  account.    What,  then,  was  this  money 
in  the  concrete  ?  v 

From  the  time  of  Queen  Elizabeth  until  18 16, 
a  pound  troy  of  sterling  silver  (.925  fine)  was 
coined  into  62  shillings.  Spain  and  her  colonies 
being^the  chief  source  of_silver,  the  Spanish  dol- 
larTound^ts  wayTnto'England  and  this  country. 
This  dollar,  called  the  old  Seville  piece  of  eight, 
contained  the  same  amount  of  pure  silver  as  4s.  6d. 
sterling.  But  in  this  country,  as  finally  settled, 
this  dollar  in  Colonial  currency  was  8s.  in  New 
York  and  North  Carolina ;  6s.  in  New  England 
and  Virginia ;  7s.  6d.  in  New  Jersey,  Pennsyl- 
vania, Maryland,  and  Delaware;  5s.  in  Georgia. 
The  colonists  in  their  foreign  trade  acquired  Eng- 
lish, French,  Spanish,  Portuguese,  and  other  gold 
and  silver  coins,  which,  taking  their  contents  in 
pure  metal  and  allowing  the  market  ratio 
between  gold  and  silver,  could  be  valued  in  terms 
of  Colonial  money.  Any  colonist  who  sold  Colo- 
nial produce  abroad,  bought  foreign  products, 
received  or  paid  coin  in  his  accounts,  could  state 
his  transactions  and  his  profit  or  loss  in  Colonial 
£,  s.  d.  By  making  Colonial  shillings  smaller 
than  English  shillings  the  colonists  gained  noth- 
ing, for  the  prices  of  goods  were  raised  to  cor- 
respond. Nearly  all  the  colonies  issued  paper  ~ 
money  and  made  it  a  legal  tender,  with  penalties 
for  asking  a  higher  price  in  paper  than  in  hard 
money,  with  the  result  that  £100  specie  was  the 
equivalent  of  ;f  525  Massachusetts  paper  money  in 


150 


VALUE. 


\ 


1740,  and  of  ;f  1, 1 00  in  1748.  Adam  Smith  said  in 
commentmg  on  Colonial  money  (*' Wealth  of 
Nations,"  B.  2,  Chap.  2) :  -  A  positive  law  may 
render  a  shilling  a  legal  tender  for  a  guinea 
because  it  may  direct  the  courts  of  justice  to  dis^ 
charge  the  debtor  who  made  the  tender.  But  no 
positive  law  can  oblige  a  person  to  sell  goods  and 
who  IS  at  liberty  to  sell  or  not  to  sell  as  he 
pleases,  to  accept  of  a  shilling  as  an  equivalent  to 
a  guinea  in  the  price  of  them." 

Continental  Money.  The  colonies,  afterward 
States,  fought  the  mother  country  jointly  and  sev- 
erally  on  credit ;  the  people  were  opposed  to  taxa- 
tion.  The  Continental  Congress  had  no  power  and 
the  several  States  had  no  disposition,  to  tax.  Con- 
gress  and  the  States  severally  issued  bills  of  credit 
to  very  large  amounts.  Continental  money  was 
expressed  in  Spanish  dollars  and  ninetieths  a 
Pennsylvania  penny  being  one-ninetieth  of  a  dol- 
lar. 

An  account  of  this  money  is  given  in  a  report, 
April  18,  1781,  by  a  committee  appointed  to  esti- 
mate  and  state  the  amount  of  the  debts  of  the 
United  States,  with  the  necessary  estimates  for  the 
current  year  as  near  as  could  be  done,  the  debts 
being  stated  in  Continental  money  at  $230,000,000  • 
also  in  specie,  on  the  basis  of  75  to  i ,  at  $3,066,666% ' 
One  Item  of  the  total  is  $160,000,000  of  Continental 
money  then  supposed  to  be  outstanding.  They 
say :  -  It  can  not  be  forgotten  that  these  United 
States  were  plunged  into  a  war  and  that  an  army 


VALUE. 


151 


was  drawn  together  before  any  money  was  pro- 
vided or  funds  established  for  defraying  the 
expense  thereof.  In  this  situation  of  affairs  Con- 
grress  met  in  May,  1775.  They  had  no  resource 
from  whence  to  derive  present  supplies  but  that 
of  emitting  bills  of  credit  redeemable  at  a  f uture^  *^ 
day.  On  JuneT2ri775,  Congress  agreed"^© ~ emit 
two  millions,  which,  on  July  25th,  was  increased  to 
three  millions,  for  the  redemption  of  which  they 
pledged  the  confederated  colonies ;  on  November, 
29,  177s,  three  millions  more  were  authorized  on 
the  same  security;  on  February  17,  1776,  four 
millions  more  ;  on  May  9,  1 776,  five  millions  more ; 
on  July  22,  1776,  five  millions  more.  But  as  it 
was  foreseen  that  such  repeated  issues  of  bills  of 
credit  would  increase  the  quantity  to  too  great  a 
degree,  and  consequently  occasion  their  deprecia- 
tion, it  was  resolved  in  October  to  borrow  five 
millions,  and  in  November  a  lottery  was^set  on 
foot.  As  neither  loans  nor  the  lottery  were  suffi- 
ciently productive,  necessity  compelled  further 
emissions  of  biljs_  of  credit.  By  this  means  the 
paper  currency  being  multiplied  began  to  depre- 
ciate. It  was  therefore  resolved,  September  10, 
I  'j'j'j,  to  prepare  an  earnest  recommendation  to  the 
States  to  proceed  to  taxation  ;  also  to  borrow^larger 
sums.  Unfortunately  the  tax  failed,  and  the  sums 
obtained  from  loans  were  greatly  inadequate  to 
the  expenditure ;  consequently  more  money*  was 
emitted,  and,  notwithstanding  the  favorable  turn 
in  our  affairs  in  1778,  depreciation  increased  with 


i 


15:;^ 


VALUE. 


I 


amazing  rapidity.    At  the  close  of  the  year  1778 
the  sums  emitted  and  borrowed  amounted  to  about 
one  hundred  and  eight  millions.    Congress,  anx- 
ious to  put  a  stop  to  any  further  emissions  and  to 
provide  a  fund  for  redeeming  whrt'was  issued 
called  upon  the  States  to  pay,  etc.     But  the  public 
treasury,  receiving  no  recruit  from  taxes,  was  from 
time  to  time   replenished  with   ne^emissions ; 
depreciation,  instead  of  receiving  a  check,~^o^ 
,  -^cee^d  with  redoubled  vigor.    On  September  i, 
^    1 779'  the  sum  emittea  and  in  circulation  amounted 
\  ^to  $159,948,880;  and  as  there  was  a  great  outcry 
i\j^   on  account  of  the  depreciation  and  the  floods  of 
^     a  money  emitted.  Congress  resolved  that  they  would 
^  on  no  account  whatever  emit  more  bills  than  to 
make  the  whole  two  hundred  millions.    Congress 
was  compelled  by  necessity  to  issue  this  remain- 
der, etc. 

The  rate  of  exchange  for  hard  money  at  Phil- 
adelphia  was,  at  the  end  of  1776,1 1^  to  i;  of  1777, 
4  to  l;  of  1778,  9  to  i;  of  1779,  45  to  l;  of  1780,  lOO 
to  i;  m  May,  1781,  from  200  to  500  to  i,  when  it 
ceased  to  circulate  there,  and,  soon  afterward, 
elsewhere. 

^^  The  quantity  of  the  paper  money  destroyed  its 
value,  although  it  was  sustained  by  legal-tender 
laws,  limitation  of  prices,  penal  laws,  vigilance 
committees,  and  military  force. 

Thos.  Paine,  in  a  letter  to  Danton,  dated  May, 
1793, said:  "The  assignats  are  not  of  the  same 
value  they  were  a  year  ago,  and  as  the  quantity 


f 


VALUE. 


153 


increases  the  value  of  them  will  diminish.  This 
gives  the  appearance  of  things  being  dear  when 
they  are  not  so  in  fact,  for  in  the  same  proportion 
that  any  kind  of  money  falls  in  value,  articles  rise 
in  price.  If  it  were  not'^or  this  the  quantity  of 
assignats  would  be  too  great  to  be  circulated. 
Paper  money  in  America  fell  so  much  in  value 
from  the  excessive  quantity  of  it  thaf  in  the  year 
1 78 1  I  gave  $300  for  one  pair  of  worsted  stock- 
ings. What  I  write  to  you  on  this  subject  is 
experience  and  not  merely  opinion." 

While  Continental  money  remained  a  legal 
tender,  debtors,  executors^  trustees,  and  guardians 
could  easily  discharge  their  liabilities.  But  after 
the  collapse  and  the  repeal  of  the  legal-tender 
acts,  debts  theretofore  incurred  were  in  a  differ- 
ent category.  Debts  were  scaled  down,  stay  laws 
passed,  about  all  kinds  of  property  made  a  legal 
tender  at  a  valuation,  and  in  some  States  new 
bills  of  credit  wer^  issued.  There  was  financial 
anarchy  and  almost  civil  war. 

A  Coinage  and  a  Money  Unit, 

The  States  having  achieved  their  independence 
and  survived  their  difficulties,  adopted  the  pres- 
ent Federal  Constitution  and  therein  provided  that 
Congress  shall  have  power  to  coin  money,  rege- 
late the  value  thereof  and  of  foreign  coin,  and  fix 
the  standard  of  weights  and  measures.  Also  that : 
gp^  State  shall  coin  money,  emit  bills  of  credit, 
make  anything  but  gold  and  silver  coin  a  tender 


154 


VALUE. 


\ 


in  payment  of  debts,  or  pass  any  law  impairing 
the  obligation  of  contracts. 

The  Secretary  of  the  Treasury  (Mr.  Hamilton), 
in  his  report  relative  to  the   establishment  of  a 
mint,  etc.,  January  28,  1791,  said:   ''The  pound, 
though  of  various  values,  is  the  unit  of  account  in 
all  the  States.     But  it  is  not  equally  easy  to  pro- 
nounce what  is  to  be  considered  as  the  unit  in  the 
coins.    The    manner  of    adjusting    the    foreign 
exchanges  would  seem  to  indicate  the  dollar  as 
best  entitled  to  that  character.     In  these  the  old 
piaster  of  Spain,  or  old  Seville  piece  of  eight  rials, 
of  the  value  of  4s.  6d.  (sterling),  is  evidently  con' 
templated.     But  this  circumstance  in  favor  of  the 
4oll§r  loses  much  of  its  weight  from^wo  consid- 
erations.   That  species  of  coin  has  never  had  any 
settled  or  standard  value  according  to  weigh*t  or. 
fineness,  but  has  been  permitted  to  circulate  by 
tale,  without   regard   to  either,  very   much  as  a 
matter  of  convenience,  while  gold  has  had  a  fixed 
price  by  weight  and  with  an  eye  to  its  fineness. 
This  greater  stabiH^tyJn  the  value  of  gold  is  an 
argument  of  force  for  regarding  the  money  unit 
as  having  been  hitherto  virtually  attached  to  gold  • 
24  Ji  grains  of  fine  gold  have  corresponded  ~^^I!h 
the  nominal  value   of  the   dollar  in   the  several 
States,  without  regard  to  the  several  denomina- 
tions of   its    intrinsic   worth.     But  if  the  dollar 
should,  notwithstanding,  be  supposed  to  have  the 
best  title  to  being  considered  as  the  present  unit, 
it  would  remain  to  determine  what  kind  of  a  dol' 


VALUE. 


155 


lar  ought  to  be   understood,    or  in   other  words 
what  quantity  of  silver." 

"The  old  piaster  of  Spain,  which  appears  to 
have  regulated  our  exchanges,  weighed  17  dwt. 
12  grains,  and  contained  3863^  grains  of  fine  silver. 
But  this  piece  has  been  long  since  out  of  circu- 
lation. The  dollars  now  in  common  currency  are 
of  recent  date  and  much  inferior  to  that,  both  in 
weight  and  fineness.  The  average  weight  of 
these,  upon  different  trials  in  large  masses,  has 
been  found  to  be  17  dwt.  8  grains.  Their  fine- 
ness is  less  precisely  ascertained ;  the  result  of 
various  assays  made  by  different  persons  under 
the  direction  of  the  late  Superintendent  of  the 
Finances,  and  of  the  Secretary,  being  as  various 
as  the  assays  themselves.  The  experiment  which 
appears  to  have  the  best  pretensions  to  exactness 
would  make  the  new  dollar  to  contain  370.933 
grains  of  pure  silver.  And  the  Secretary  finally 
reached  the  conclUvSion  that  the  sum  of  money 
of  account  of  each  State,  corresponding  with  the 
nominal  value  of  the  dollar  in  each  State,  corre- 
sponds also  with  24^  grains  of  fine  gold  and  with 
something  between  368  and  374  grains  of  fine 
silver."    (The  average  of  these  is  371.) 

By  an  act  of  Congress,  April  2,  1792,  establish- 
ing a  mint,  etc.,  it  was  enacted  that  the  money  of 
account  of  the  United  States  shall  be  expressed 
in  dollars_or  units,  dimes  or  tenths,  cents  or, 
hundredths,  and  mills  or  thousandths,  and  th^t 
all  accounts  in  the  public  offices  and  all  proceed- 


156 


VALUE. 


ings  in  the  courts  of  the  United  States  shall  be 
kept  and  had  in  conformity  to  this  regulation; 
also,  that  there  shall  be  from  time  to  time  struck 
and  coined  at  the  mint,  coins  of  gold,  silver,  and 
copper,  having  thereon  the  devices  and  legends 
in  the  act  specified,  to  wit :    In  gold,  eagles  ($io), 
half  and  quarter  eagles ;  in  silver,  dollars,  halves! 
quarters,  dimes,  and  half-dimes  ;  in  copper,  cents! 
and  half^ents.    The   dollars  each  to  be  of  the\ 
value  of  the  Spanish  milled  dollar  as  the  same  is 
now  current,  and  to  contain  371.25  grains  (troy)  of 
pure  silver  or  416  grains  of  standard  silver;  the 
other  silver  coins  to  be  of  standard  silver  and  of 
proportionate  weight  and  value ;  the  eagle  to  con- 
tain  247.50  grains  of  pure  or  270  grains  of  stan- 
dard gold  ;  the  half  and  quarter  eagles  to  be  of 
standard  gold  and  of  proportionate  weight  and 
value. 

Also,  that  the  gold  and  silver  coins  issued  from 
the  mint  shall  be  a  lawful  tender  in  all  payments 
those  of  full  weight  at  their  nominal  value  and 
those  of  less  weight  at  values  proportional  thereto. 

Also,  that  the  proportional  value  of  gold  to 
silver  in  all  coins  which  shall  by  law  be  current 
within  the  United  States  shall  be  as  fifteen  to 
one,  according  to  quantity  in  weight  of^pH?i^ld~" 
or  pure  silver;  that  is  to  say,  every  fifteen  pounds 
weight  of  pure  silver  shall  be  of  equal  value  in 
all  payments  with  one  pound  weight  of  pure  gold, 
and  so  in  proportion  as  to  any  greater  or  less 
quantities  of  the  respective  metals. 


VALUE. 


157 


In  estimating  coins  the  alloy  is  not  valued. 

The  coinage  of  gold  and  silver  was  made  free  /? 
and  gratuitous. 

Foreign  Coins.  By  the  act  of  February  9,  1793, 
regulating  foreign  coins,  etc.,  sundry  foreign 
gold  and  silver  coins  therein  named  were  to  pass 
current  as  money  within  the  United  States  and 
be  a  legal  tender  at  the  rates  therein  specified. 
But  all  such  coins  received  in  payment  of  moneys 
due  the  United  States  (Spanish  milled  dollars  and 
parts  thereof  excepted),  after  coinage  should  begin 
at  the  mint,  were  to  be  coined  anew.  Other  acts 
of  a  similar  nature  were  passed  from  time  to  time 
until,  by  the  act  of  February  21,  1857,  all  former 
acts  authorizing  the  currency  of  foreign  coin  and 
declaring  the  same  a  legal  tender  in  payment  of 
debts  were  repealed. 

Ever  since  the  act  of  1 792  the  money  unit  of 
the  United  States  has  been  called  a  dollar;  all 
accounts  and  sums  of  money  are  stated  in  terms 
of  it  and  its  decimal  parts.  And  by  that  act  a 
dollar  signified  24^  grains  of  pure  gold,  or  371 J^ 
grains  of  pure  silver,  in  United  States  coin,  or  in 
foreign  coin  made  current  by  law. 

But  the  relative  market  value  of  the  two  metals 
having  varied  from  the  ratio  of  1 5  to  i  by  the  act 
of  June  28,  1834,  "concerning  the  gold  coins, 
etc.,"  the  weight  of  the  eagle  was  reduced  to  232 
grains  of  pure  and  258  grains  of  standard  gold. 

This  altered  the  coinage  ratio  to  ^=16+  to  i  ; 
the  commercial  ratio  then  was  15.73  to  ^-    Silver 


Hl 


itr 


158 


VALUE. 


'^' 


was  intentionally  undervalued  in  order  by  its  ex 
portation,  to  bring  about  a  single  gold  standard" 
The  gold  coins  previously  minted  were  given  the 
value  of  $0.94.8  per  pennyweight ;  those  remain- 
ing in  the  country  were  recoined 

Afterward,  by  the  act  of  January  ,8,  ,837 
supplementary  to  the  act  establishing  a  mint 
etc  the  standard  of  nine-tenths  fine  for  both 
gold  and  silver  coins  was  adopted.  The  standard 
weight  of  the  gold  coins  was  left  the  same  as 
under  the  act  of  ,834 ;  the  alloy  was  reduced  and 
a  little  more  gold  added.  The  weight  of  the  sil- 
ver dollar  was  reduced  to4.2>^  grains  by  reduc- 
ing the  alloy,  the  other  silver  coins  to  be  in  pro- 
portion. The  coinage  ratio  thereby  became 
aj.M- '5-988+   to   I,   the  commercial  ratio  then 

^.V"^/!,^"^^/"  ''^°^  '"''^''  ^""tinned  to  be  worth 
more  than  its  coinage  ratio  until  1874 

In  order  to  prevent  the  exportation  of  the  frac- 
tional silver  coins,  by  the  act  of  February  21, 18?^ 
amendatory  of  existing  laws  relative  to  the  half- 

nf  r  rfJ!f ';,  ^'"^^^  ^°*^  half^iime,"  the  weight 
of  the  h^f-dollar  was  reduced  to  .92  grains,  and 
of  the  others  in  proportion.  Their  legal-tender 
power  was  limited  to  $5  in  any  one  payment,  and 
their  coinage  to  be  done  solely  on  Government 
account.  They  were  reduced  from  standard  to 
token  coins.  — — —  — 

The  coinage  of   gold  dollars  and  of   double 
eagles  was  authorized  by  the  act  of  March   x 

1 849.  •^* 


VALUE. 


159 


This  suffices  to  show  the  alterations  made  in 
the  coinage  prior  to  the  year  1873. 

Bank  Notes.  Althoug  it  was  generally  con- 
ceded that  Congress  could  establish  a  money  sys- 
tem, give  its  unit  a  name,  and  manufacture  coins 
pursuant  thereto,  yet  its  power  to  issue  directly  or 
indirectly  paper  tokens  in  any  form  suitable  for 
circulation  as  money  was  denied  by  the  advocates  Jj 
of  State  rights,  although  it  was  adjudged  by  the 
Supreme  Court  of  the  United  States  that  Congress 
could  create  a  bank  with  power  to  issue  bank 
notes ;  and  it  was  also  held  by  that  court  that  such 
notes  issued  by  a  corporation  created  by  a  State 
were  not  **  bills  of  credit,"  prohibited  by  the  Fed- 
eral Constitution.  The  result  was  that  with  the 
exception  of  a  first  and  second  bank  of  the 
United  States,  hereafter  mentioned,  Congress 
created  no  banks  until  1 863 ;  and  until  then  the 
several  States  competed  with  each  other  in  stuff- 
ing the  currency  with  bank  notes  issued  by  cor- 
porations created  under  State  authority.  The 
doctrine  generally  received  and  acted  on  was,  that 
Congress  could  coin  money  and  the  States  could 
expel  it  from  circulation  and  from  the  country  by  / 
issues  of  bank  notes. 

But  it  finally  became  obvious  that  Congress 
could  not  regulate  the  value  of  money  unless  it 
had  the  power  to  regulate  its  kind  and  quantity. 
Whereupon,  about  1883,  it  was  finally  adjudged 
that  "  Congress  has  power  to  provide  a  National  // 
currency  and  secure  the  benefit  of  it  to  the  peo- 


160 


, 


f 


\ 


VALUE. 


\ 


pie  To  this  end  Congress  has  denied  the  quality 
of  legal  tender  to  foreign  coin,  and  has  provided 
by  law  against  the  imposition  of  counterfeit  and 
base  com  on  the  community.    To  the  same  end 

ciSr  "^""l  '^'■""■""'  ''y  ^"'table  enactments  the 
circulation  of  any  notes  not  issued  under  its 
authonty.  Without  such  power  its  attempts  to 
secure  a  sound  and  uniform  currency  to  the  coun 
try  must  be  futile.  Also,  that  Congrel  can 
authorize  the  direct  issue  of  bills  of  credit  and 
make  them  a  legal  tender  in  all  payments  " 

r  J5\^^'*  ^*°^  ""^  '^^  U'^'t^^  States  was  estab- 
lished by  an  act  of  Congress,  approved  February 

M;rr''  Z  Vh*'°'°°°'°°°'  t°  continue  untJ 
March  4.  i8i  I.  This  act  was  passed  more  than  a 
year  prior  to  the  act  establishing  a  coinage  and  a 
money  unit  to  be  called  a  dollar  - 

At  first  the  States  created  banks  of  issue  under 
special  charters,  a  few  prior  to  .790.  By  "g'l 
they  had  become  numerous,  with  a  nominal  cap. 
ital    exceeding  $75,ooo.a>o,    which  usually  con- 

the  stoct     "^  °'  '"'  '^''^^  °'  ^''^  subscribe  to 

The  Banking  Principle.  According  to  this  orin 
c:ple,  a  bank  of  issue  needs  no  more  money  to  3 
It  in  operation  than  enough  to  furnish  an  olBce 
and  to  pnnt  its  bank  notes.  Having  fiLd  itJ 
coffers  with  them  it  is  ready  to  exchange  them 
for  commercial  paper,  discounted  at  the  current 
rate ;  ,t  exchanges  its  notes  not  bearing  interest 
for  the  notes  and  bills  of  others  bearing  interest 


1 


VALUE. 


161 


When  the  paper  discounted  matures  and  is  paid, 
it  has  redeemed  its  notes  or  acquired  the  means 
to  do  so.  Thereupon  it  can,  at  least  theoretically, 
continue  to  discount  commercial  paper  '  and 
redeem  its  notes  in  that  manner  for  all  time, 
although  bank  notes  became  so  abundant  that  a 
pair  of  worsted  stockings  would  sell  for  $300,  and 
other  things  in  proportion.  But  a  demand  for 
specie  knocks  the  wind  out  of  the  banking  prin- 
ciple, and  that  occurs  when  specie  is  wanted  for 
exportation_or  other  purpose.  The  notes  get  into 
circulation  under  the  faith  that  they  will  be 
redeemed  on  demand^  and  if  payment  is  refused 
the  solvency~6r^e  bank  is  distrusted  and  its 
notes  become  uncurrent.  But  the  banking  prin- 
ciple was  aided  by  circulating  the  notes  as  far 
away  from  home  as  possible  and  scattering  them 
broadcast  so  that  they  might  slowly  return  in 
single  file.  This  was  effected  by  exchanging 
notes  with  distant  banks  under  a  mutual  under- 
standing to  scatter  the  notes  as  much  as  possible, 
or  by  lending  them,  e.  g.,  at  Chicago  to  solvent 
buyers  of  live  stock,  grain,  etc.,  from  people 
residing  west  of  the  Mississippi. 

After  a  bank  has  put  its  notes  in  circulation 
and  thereby  assisted  in  providing  the  people  with 
a  currency,  it  can  refuse  to  redeem  the  notes  and 
still  continue  to  do  business,  provided  its  debtors 
will  pay  or  can  be  forced  to  pay  their  debts. 
Having  borrowed  its  capital  from  the  people  it 

would  lose  it  by  redeeming  its  notes.     Therefore, 
11 


H,:i 


I 


162 


VAL  UE. 


I 


V 


It  was  customary,  when  the  notes  became  dis- 
trusted  so  that  it  would  be  difficult  or  impossible 
to  reissue  them,  to  suspend  payment.  The  Bank 
of  England  suspended  specie  payment  in  1707  ^ 
and  did  not  resume  for  twenty  years  or  more! 
Why  should  not  American  banks  imitate  so  illus- 
trious  an  example  ? 

In  "Gouge  on  Banking"  (Part  II,  p.  143)   is 
quoted  a  report  of  the  directors  of  the    State 
Bank  of  South  Carolina,  dated  October  i    18 19  in 
which  the  effects  produced  by  the  resumption  of 
specie  payments  are    deplored    as    unnecessary 
evils.    -  It  becomes  necessary  (say  the  directors) 
to  inquire  whether,  in  the  present  sUte  of  the 
world,  a  metallic  currency  sufficient  for  the  wants 
of  our  country  is  attainable,  and  whether,  if  it  be 
obtained,  it  will   be   worth  the  necessary   cost  • 
whether,  in   fact,  a  currency  equally  good,    per' 
haps  better,  may  not  be  established  without  any 
of  those  sacrifices  which   our  country  has  been 
already  obliged  to  make,  and  which  it  must  for  a 
long  time   make,  to   secure    this   fugitive    and 
evanescent  object.     In  Great  Britain,  where  alone 
m  modern  days,  gold  and  silver  have  for  a  short 
time  been  left  freely  to  find  their  value  in  an  un- 
shackled    market,    they    have    been    known    to 
fluctuate   m    value  nearly   50  per   cent    in    the 
course  of  a  few  months,  a  fluctuation  which  no 
paper  currency  has  undergone,  except  such  as  has 
been  issued   by  the  mandates  of  arbitrary  and 
necessitous  governments,  where  no  value  is  re- 


VALUE. 


163 


ceived  for  their  emission,  no  pledge  given  for 
their  redemption." 

No  doubt  the  notes  of  this  bank  never  fluc- 
tuated in  value  relative  to  each  other ;  two  notes 
for  the  same  amount  were  always  of  equal  value. 

But  in  "Gouge  on  Banking  "(Part II,  p.  166)  is 
griven  a  table  showing  the  discount  on  the  notes  of 
the  Pennsylvania  country  banks,  not  in  specie  but 
in  Philadelphia  bank  paper,  from  which  it  appears 
that  November  i,  18 19,  the  discount  was,  of  the 
notes  of  one  bank,  60  per  cent ;  of  eight  banks, 
50  per  cent ;  others  from  15  to  45  per  cent,  and 
the  notes  of  seven  out  of  a  total  of  thirty-three 
were  at  par.  On  the  following  page  of  the  same 
book  is  given  a  table  of  the  prices  of  bank  notes 
at  Baltimore,  August  7,  1819,  the  discount  on  them 
being  as  follows:  New  England  notes,  i  to  6; 
Pennsylvania,  i  to  60;  Delaware,  i  to  50;  Mary- 
land, I  to  40;  District  of  Columbia,  i  to  60;  Vir- 
ginia, 1%  to  25;  North  Carolina,  20  to  25;  South 
Carolina,  8  to  10;  Georgia,  7  to  8;  Kentucky,  15 
to  25  ;  Ohio,  10  to  50;  Indiana,  Illinois,  and  Mis- 
souri, 15  to  60. 

To  which  is  added  the  statement  that  the 
prices  of  bank  notes  varied  several  per  cent  in  the 
course  of  a  week.  The  notes  which  were  at  par 
in  one  part  of  the  country  were  in  other  parts 
at  a  heavy  discount.  A  bank's  paying  specie  did 
not  prevent  its  notes  from  depreciating,  for  no- 
body knew  how  long  any  distant  bank  would  con- 
tinue to  pay  specie.     All  banks  whose  notes  were 


I 


164 


VALUE. 


at  a  discount  at  New  York  of  less  than  5  per  cent, 
and  some  of  the  others,  were  understood  to  pay 
specie  on  demand. 

When  the  banks  suspended  specie  payment,  as 
they  often  did,  the  people,  and  the  government 
also,  had  the  benefit  of  Hobson's  choice — they 
could  use  the  dishonored  bank  notes  as  a  currency 
or  go  without  any  kind  of  money.  The  notes  be- 
ing of  various  and  variable  values,  everybody 
could  estimate  daily,  by  the  aid  of  bank-note 
detectors  and  reporters,  the  specie  value  of  his 
money.  For  others  assisted  in  furnishing  the 
people  with  a  currency,  to  wit,  ordinary  counter- 
feits ;  genuine  notes  altered  from  lower  denomi- 
nations to  higher  ones;  genuine  notes  of  failed 
banks  altered  to  the  names  of  solvent  banks; 
notes  of  banks  having  no  existence ;  notes  pur- 
porting to  be  issued  by  a  bank  which  never  issued 
any  of  that  denomination. 

According  to  "  Gouge  on  Banking,"  Part  II,  p. 
160,  Governor  Wolcott,  in  an  address  to  the  Legis- 
lature of  Connecticut  in  May,  1826,  said:  "The 
currency  which  is  required  by  the  daily  exchange 
between  all  the  people,  and  by  which  the  trans- 
actions between  farmers,  mechanics,  laborers, 
manufacturers,  and  traders  is  regulated,  is  almost 
exclusively  in  bank  notes,  which  are  issued  by  a 
great  number  of  independent  corporations  which 
possess  an  exclusive  privilege  of  creating  notes 
for  their  own  benefit." 

'*This  monopoly  is  here  so  exercised  that  neither 


VALUE. 


165 


the  amount  of  currency  which  is  issued,  nor  the 
amount  of  that  which  is  suddenly  suspended, 
withdrawn,  or  annihilated,  is  subject  to  any  prac- 
tical limitation  other  than  what  must  arise  from 
the  state  of  foreign  and  domestic  exchanges,  the 
speculations  of  individuals,  political  events,  and 
the  necessities  or  caprices  of  the  numerous  monop- 
olizing incorporations  who  entirely  control  the 
circulation  of  the  country.  These  last  observa- 
tions require  no  other  confirmation  than  a  refer- 
ence to  the  notorious  fact  that  no  coins  circulate 
among  the  people,  except  small  sums  of  copper 
and  the  fractional  parts  of  a  dollar  in  silver,  which 
is  our  silver  unit.  Our  unit  of  gold  in  a  coin  of 
$10,  which,  with  its  fractional  parts  in  coins  of  $5 
and  $2.50,  have  wholly  vanished  from  circulation. 
The  effects  produced  on  the  people  are  that  no 
man  can  travel  fifty  miles  in  any  direction  with- 
out receiving  paper  notes  of  which  he  possesses 
no  means  of  ascertaining  the  value,  or  even  the 
authenticity,  and  this  difficulty  increases  in  pro- 
portion to  the  distance  of  an  individual  from  some 
one  of  these  banks.  From  these  causes  the  whole 
country  is  subject  to  complex  evils,  arising  from 
either  a  redundant  or  too  restricted  circulation  of 
the  only  currency  which  can  be  obtained,  and 
hence  sudden  variations  in  the  prices  of  exchange- 
able commodities  far  exceeding  the  customary 
profits  of  regular  industry  and  commerce,  thereby 
converting  all  transactions  of  business,  especially 
at  a  distance  from  the  seats  of  foreign  commerce, 


166 


VALUE, 


* 

I 


into  mere  lotteries.  It  is  amidst  explosions  of 
credit,  principally  occasioned  by  the  conduct  of 
banks,  that  every  class  of  industrious  citizens  and 
all  our  enterprising  young  men  are  exposed  to 
repeated  losses,  against  which  no  vigilance  can 
guard  and  no  prudence  exempt  them." 

War  was  declared  against  Great  Britain  in  June, 
1 812,  and  terminated  in  181 5.  Washington  was 
taken  by  a  small  invading  force  and  the  public 
buildings  burned.  Insolvency  compelled  peace 
without  honor,  except  on  the  water,  and  finally  at 
New  Orleans. 

There  was  no  National  currency,  no  money  or 
its  equivalent,  which  represented  the  same  value 
in  all  places.    The  first  National  bank  ceased  to 
exist  in  181 1.     Local  banks  overspread  the  land, 
and  upon  these  the  Government  was  thrown  for 
currency  and  for  loans.     They,  unequal  to  the 
task,  and  having  removed  their  own  foundations 
by  banishing  specie  by  profuse  issues,  sank  under 
the  double  load  of  National  and  local  wants,  and 
stopped  specie  payments,  except  New  England, 
which  section  was  unfavorable  to  the  war.   Treas^ 
ury  notes  were  then  the  resort  of  the  Government. 
They  were  issued  in  great  quantities,  and   not 
being  convertible  into  coin  at  the  will  of  the 
holder,  soon  began  to  depreciate.     In  the  second 
year  of  the  war,  depreciation  had  become  enor- 
mous.     An  officer  setting  out  from  Washington 
with  a  supply  of  these  notes  found  them  sunk 
one-third  by  the  time  he  reached  the  northern 


VALUE. 


107 


frontier.  They  could  not  be  used  as  a  currency, 
but  only  to  obtain  local  bank  paper,  itself  greatly 
depreciated.  All  Government  securities  were 
under  par,  even  for  depreciated  bank  notes.  Loans 
were  obtained  with  great  difficulty  at  large  dis- 
count, on  the  lender's  own  terms,  and  still  attain- 
able only  in  depreciated  bank  notes.  (Benton's 
*'  Thirty  Years'  View,"  Vol.  I,  p.  i.) 

The  form  of  these  Treasury  notes  was,  in  sub- 
stance, that  the  United  States  would  receive  this 

note  for dollars,  with  interest  from  the  date 

thereof,  in  all  payments  to  them,  or  issue  on  de- 
mand therefor  to  A  B  or  order  6  per  cent  stock, 
agreeably  to  the  act  of  Congress.  Total  amount 
issued,  $36,680,794.  Of  the  eighty  millions  of 
loans  negotiated  by  the  Government  the  avails 
were  only  thirty  millions,  after  deducting  dis- 
counts and  depreciations.  ("  United  States  Notes," 
by  Knox,  Chap.  5.) 

The  population  had  trebled  since  the  days  of 
Continental  money,  and  a  Federal  Government 
existed  with  adequate  powers,  but  its  adminis- 
tration was  in  the  hands  of  the  advocates  of  State  ] 
rights,  who  shuddered  at  the  idea  of  a  Treasury  ; 
note  drawn  payable  to  the  bearer,  or  made  a  legal 
tender  in  any  form.  The  United  States  then 
existed  in  the  plural  number  only. 

But  the  President  (Mr.  Madison)  having  been 
chased  out  of  Washington  by  the  enemy,  a  cur- 
rency consisting  of  State  bank  notes  sickened  on 
the  Democratic  stomach,  and  that  party,  with  the 


1 


168 


VALUE. 


^ 


\ 


President  at  its  head,  discovered  sufficient  author- 
ity to  establish  the  Second  Bank  of  the  United 
States,  capital  $35,000,000,  created  by  an  act  of 
Congress  approved  April  10,  18 16,  to  continue 
until  March  3,  1836.  The  United  States  owned 
one-fifth  of  the  stock  and  lost  it  all. 

In  support  of  this  measure  Mr.  Calhoun  said 
in  the  House :   "  There  has  been  an  extraordinary 
revolution  in  the  currency  of  the  country.     By  a 
sort  of  undercurrent  the  power  of  Congress  to 
regulate  the  money  of  the  country  has  caved  in, 
and  upon  its  ruin  has  sprung  up  these  institu- 
tions which  now  exercise  the  right  of  making  ! 
money  in  and  for  the  United  States.     For  gold 
and  silver  are  not  the  only  money,  but  whatever 
is  the  medium  of  exchange  and  sale,  in  which 
^5?i^  paper  alone  was  now  employed  and  had 
become  the  money  of  the  country.    A  change, 
great  and    wonderful,  has    taken    place,  which 
divests  you  of  your  rights  and  turns  you  back  to 
the   Revolutionary  War,  in  which  every  State  " 
issued  bills  of  credit,  which  were  made  a  legal 
tender  and  were  of  various  values.     We  have  in 
lieu  of  gold  and  silver  a  paper  medium,  une- 
qually and  generally  depreciated,  which  aflFects 
the  trade  and  industry  of  the  nation,  which  para-  / 
lyzes  the   National  arm,  and  which  sullies  the  ■ 
faith,   both  public  and  private,  of   the  United 
States."  ' 

And  he  further  stated  that  the  banks  had  one 
hundred  and  seventy  millions  in  circulation,  and 


VALUE. 


169 


not  over  fifteen  millions  in  specie  for  its  redemp- 
tion. 

A  currency  composed  of  State  bank  notes 
having  proved  to  be  disastrous,  by  a  resolution, 
relative  to  the  more  effectual  collection  of  the 
public  revenue,  approved  April  30,  18 16,  the  Sec- 
retary of  the  Treasury  was  directed  to  adopt 
such  measures  as  he  may  deem  necessary  to 
cause,  as  soon  as  may  be,  all  duties,  taxes,  debts, 
and  sums  of  money,  accruing  or  becoming  pay- 
able to  the  United  States,  to  be  collected  and  paid 
in  the  legal  currency  of  the  United  States,  or 
Treasury  notes,  or  notes  of  the  Bank  of  the 
United  States,  as  by  law  provided,  or  in  notes  of 
banks  which  are  payable  and  paid  on  demand  in 
the  said  legal  currency,  and  that  from  and  after 
February  20th  next,  no  such  duties,  taxes,  debts, 
or  sums  of  money  accruing  to  the  United  States 
ought  to  be  collected  or  received  otherwise  than 
in  the  said  legal  currency.  Treasury  notes,  notes 
of  the  Bank  of  the  United  States,  or  notes  of 
banks  payable  and  paid  on  demand  in  said  legal 
currency. 

The  money  of  the  country  must  have  been  bad 
enough  when  Congress  saw  fit  to  declare  that, 
after  the  expiration  of  nearly  a  year,  only  specie, 
its  own  notes,  and  the  notes  of  specie-paying 
banks  "  ought "  to  be  received  at  the  Treasury. 

By  the  charter  of  the  Second  Bank  of  the 
United  States,  its  bills  and  notes  payable  on 
demand  were  made  receivable  in  all  payments  to 


1! 


r 


•1 


170 


VALUE, 


the  United  States  unless  otherwise  directed  by  an 
act  of  Congress ;  also,  the  deposits  of  the  money 
of  the  United  States  in  places  in  which  the  bank 
and  branches  thereof  were  established  were  to  be 
made  in  said  bank  or  branches  thereof,  unless  the 
Secretary  of  the  Treasury  shall  at  any  time  other- 
wise direct ;  in  which  case  the  Secretary  of  Treas- 
ury shall  immediately  lay  before  Congress,  if  in 
session,  and  if  not,  immediately  after  the  com- 
mencement of  the  next  session,  the  reasons  of 
such  order  or  direction. 

According  to  Mr.  Benton  (''Thirty  Years' View," 
Vol.  I,  p.  242),  there  was  a  part  of  the  Revolu- 
tionary debt  amounting  to  thirteen  and  a  quarter 
millions  which  bore  interest  at  3  per  cent.  The 
price  of  this  stock  in  1817  was  64  per  centum  ;  the 
money  was  in  the  Bank  of  the  United  States  to 
pay  it,  a  gratuitous  deposit  bearing  no  interest.  I 
had  submitted  a  resolve  early  in  my  term  of  ser- 
vice to  have  this  stock  purchased  at  its  market 
value,  which  was  resisted  and  defeated  by  the 
friends  of  the  bank.  I  then  moved  a  resolve  that 
the  bank  pay  interest  on  the  deposits,  which  was 
opposed  and  defeated  in  like  manner. 

In  March,  1832,  the  bank  was  notified  that  the 
Government  desired  to  pay  off  the  outstanding 
3  per  cents,  to  wit,  nine  millions,  the  public 
deposits  then  being  $12,000,000.  Instead  of  assist- 
ing,  the  bank  secretly  took  steps  to  prevent  their 
redemption.  The  money  was  worth  7  per  cent  to 
the  bank.    But  its  conduct  became  known,  where- 


VALUE, 


171 


upon  its  president  said  the  arrangement  was  made 
for  the  public  good.  To  disburse  the  money 
would  tighten  the  money  market.  Every  bank 
made  a  depository  of  public  funds  objects  to  their 
withdrawal  for  the  same  ostensible  reason,  but  in 
fact  because  the  profits  of  the  bank  would  be 
thereby  curtailed. 

General  Jackson,  then  President,  became  hos- 
tile to  the  bank,  and  the  Secretary  of  the  Treasury, 
as  directed  by  the  President,  removed  the  public 
deposits  from  it. 

The  entire  National  debt  was  paid  by  January 
I,  1835,  leaving  a  large  and  increasing  surplus  of 
revenue,  and  by  an  act  of  Congress,  approved 
June  23, 1836,  the  public  deposits  were  to  be  made 
in  specie-paying  State  banks  as  in  the  act  speci- 
fied, by  which  it  was  also  provided  that  the  money 
in  the  Treasury  on  January  i,  1837,  reserving 
$5,000,000,  should  be  deposited  with  the  several 
States  upon  the  terms  and  in  the  proportions  as 
in  the  act  specified;  the  same  to  be  made,  one 
quarter  on  January  i,  1837;  one  quarter  on  April 
I,  one  quarter  on  July  i,  and  one  quarter  on 
October  i,  1837. 

The  surplus  revenue  January  i,  1837,  after 
reserving  the  five  millions,  amounted  to  $37,468,- 
859.97.  The  first  installment  was  paid  in  specie  or 
its  equivalent,  the  second  in  valid  money,  the  third 
in  depreciated  paper,  and  the  fourth  was  never 
made.  The  revenues  were  from  six  to  ten 
millions    short  of  the  expenditures,  and    it  be- 


172 


yAL  UE. 


\\\ 


m 


\ 


<iaine  necessary  to  issue  Treasury  notes  to  meet 
the  expenditures  to  very  large  amounts,  as  to 
which,  see  "United  States  Notes,"  by  Knox, 
Chap.  6. 

The  banks  suspended  specie  payments  in  May, 
1837.     Mr.  Benton  claimed  that  he  foresaw  it.     ''  I 
recalled  the  recollection  of  the  times  of  18 18-19 
when  the  Treasury  reports  of  one  year  showed  a 
superfluity  of  revenue  for  which  there  was  no 
want,  and  of  the  next  a  deficit  which  required  to 
be  relieved  by  a  loan,  and  argued  that  we  must 
now  have  the  same  result  from  the  bloat  in  the 
paper-money  system  which  we  then  had.     Of  the 
act  which  rescinded  the  specie  circular  (of  General 
Jackson)  and  made  the  notes  of  the  local  banks 
receivable  in  payment  for  all  federal  dues,  I  said, 
*  I  oppose  it.'     I  did  not  join  in  putting  down  the 
Bank  of  the  United  States  to  put  up  a  wilderness 
of  local  banks.     I  did  not  join  in  putting  down 
the  paper  currency  of  a  National  bank  to  put  up  a 
National    paper    currency   of  a    thousand    local 
banks."     ("  Thirty  Years'  View,"  Vol.  II,  Chap.  2.) 
Mr.  Benton  also  says  (lb..  Chap.  7) :     "A  great 
disturbance  took  place  in  the  business  of   the 
country  from  the  stoppage  of  the  banks.    Their 
agreement  to  receive  each  other's  notes    made 
them  the  sole  currency  of  the  country.     It  was  a 
miserable  substitute  for  gold  and  silver,  falling 
far  below  these  metals  when  measured  against 
them,  and  very  unequal  to  each  other  in  different 
parts  of  the  country.    Those  of  the  interior  and 


VALUE. 


173 


of  the  West  being  unfit  for  payments  in  the  great 
commercial  Atlantic  cities,  were  far  below  the 
standard  of  the  notes  of  those  cities,  and  suffered 
a  heavy  loss  in  all  remittances  to  those  cities,  to 
which  points  the  great  payments  tended.  Specie 
disappeared  as  a  currency,  and  became  an  article 
of  merchandise.  Even  metallic  change  disap- 
peared down  to  the  lowest  subdivision  of  the 
dollar.  Its  place  was  supplied  by  every  conceiv- 
able variety  of  individual  and  corporation  tickets. 
Taken  by  surprise  in  the  deprivation  of  its 
revenues,  the  Federal  Government  could  only  do 
as  others  did— receive  and  pay  out  depreciated 

paper." 

The  collapse  of  the  State  banks  in  May,  1837, 
caused  the  Democratic  party,  with  Mr.  Van  Buren 
at  its  head,  to  fayor  an  independent  Treasury  and 
hard  money  for  Government  dues,  and  an  act  for 
that  purpose  was  passed  July  4,  1840. 

In  support  of  the  measure  Mr.  Benton  said :  "  I 
do  not  pretend  to  estimate  the  moneyed  losses, 
direct  and  indirect,  to  the  Government  alone  from 
the  use  of  local  bank  notes  in  the  last  twenty-five 
years,  including  the  war  and  covering  three  gen- 
eral suspensions.  Leaving  the  people  out  of  view, 
as  a  field  of  losses  beyond  calculation,  I  confine 
myself  to  the  Federal  Government  and  say  its 
losses  have  been  enormous.  We  have  had  three 
general  stoppages  of  the  local  banks  in  the  short 
space  of  twenty-two  years,"  etc.  ("  Thirty  Years' 
View,"  Vol.  II,  Chap.  15.) 


174 


VALUE. 


To  show  the  condition  of  the  people  after  the 
collapse  of  1837,  Governor  Ford,  in  his  "  History 
of  Illinois,"  said :  "  The  treasury  of  the  State 
was  indebted  (1842)  for  the  ordinary  expenses  of 
government  to  about  $313,000.  Auditor's  war- 
rants  were  selling  at  50  per  cent  discount,  and 
there  was  no  money  in  the  treasury  whatever, 
not  even  to  pay  postage  on  letters.  The  treas^ 
ury  was  bankrupt.  A  debt  of  fourteen  millions 
had  been  contracted  for  canal,  railroad,  and  other 
purposes.  The  currency  of  the  State  had  been 
annihilated  ;  there  was  not  over  two  or  three  hun- 
dred thousand  dollars  of  good  money  in  the  pock- 
ets of  the  whole  people.  They  were  indebted  to 
the  merchants,  nearly  all  of  whom  were  indebted 
to  the  banks  or  foreign  merchants,  and  the  banks 
owed  everybody,  and  none  were  able  to  pay." 

During  this  period  the  several  States  resorted 
to  stay  valuation  and  appraisement  laws.  A  large 
part  of  the  insolvency  was  settled  under  the 
bankrupt  act  of  1 84 1 . 

In  1 840  Mr.  Benton  moved  for  leave  to  bring 
in  a  bill  to  tax  the  circulation  of  banks,  bankers, 
and  all  corporations,  companies,  or  individuals 
which  issued  paper  currency.  He  said  nothing 
was  more  reasonable  than  to  require  the  moneyed 
interest  which  was  employed  in  banking,  and 
especially  in  that  branch  of  banking  which  was 
dedicated  to  the  profitable  business  of  converting 
lampblack  and  rags  into  money,  to  contribute  to 
the  support  of  the  Government.     While  the  pro- 


VALUE. 


175 


ducing  and  laboring  classes  were  all  taxed  in  their 
salt,  iron,  sugar,  etc.,  the  banking  interest,  which 
manufactured  and  monopolized  money,  which  put 
up  and  put  down  prices,  and  held  the  whole  coun- 
try tributary  to  its  wealth,  paid  nothing.  In  other 
countries  the  banking  interest  was  subject  to 
taxation.  The  tax  on  circulation  and  bills  of 
exchange  was  a  handsome  item  in  the  budget  of 
British  taxation.  In  this  country,  during  the  war 
with  Great  Britain,  the  banking  interest  had  been 
taxed  in  its  circulation,  discounts,  and  bills  of 
exchange.  At  the  end  of  the  war  this  tax  was 
abolished,  while  most  of  the  war  taxes  were  con- 
tinued in  force,  among  them  the  tax  on  salt  and 
other  necessaries  of  life.  It  is  time  to  make  the 
banks  pay  and  to  let  salt  go  free.  But  his  motion 
came  to  nothing.     (Benton's  "  Thirty  Years,"  etc. 

Vol.  II,  p.  179.) 

The  hard  times  ensuing  after  1836-7  defeated 
the  Democratic  party  in  the  Presidential  canvass 
of  1840,  and  the  independent  Treasury  act  was 
repealed  August  13,  1841.  But  this  party  having 
regained  power  in  1845,  reCwStablished  their  meas- 
ure by  an  act  for  that  purpose,  approved  August 
6,  1846,  by  which  it  was  provided  that  on  and 
after  January  i,  1847,  all  sums  due  the  United 
States  should  be  paid  in  coin,  and  after  April  i, 
1847,  ^  payments  made  on  account  of  the  United 
States  should  be  made  in  coin  or  Treasury  notes 
if  the  creditor  agree  to  receive  them.  Thereafter 
until  the  war  of  secession  the  Federal  Government 


t, 


176 


VALUE. 


kept  its  own  funds  and  did  business  on  a  specie 
basis. 

About  1840  the  notion  began  to  prevail  that 
banking  ought  to  be  free ;  that  everybody  ought 
to  be  allowed  to  issue  bank  notes  who  could  com- 
ply with  the  conditions  prescribed.  But  these 
banks  failed  also.  In  1854  a  free  banking  system 
adopted  in  Indiana  went  to  pieces  and  the  hold- 
ers of  the  notes  suffered  great  loss. 

In  1857  there   was  another  bank  suspension, 
the  effects  of  which  continued  when  the  Civil  War 
began.      In  the   fall  of   i860    Mr.   Lincoln   was 
elected  President,  and  thereupon  the  Southern 
States  attempted  to  secede,  and  to  that  end  com- 
bined as  the  Confederate  States,   in   February, 
1 861.    The  State  of  Illinois  then  had  a  free  bank- 
ing system.    The  banks  were  numerous,  small, 
and    generally  located  in  out-of-the-way  places, 
with  a  view  to  avoid  the  redemption  of  their 
notes.    They  were  so  many  petty  paper-money 
factories,  having  about  $12,000,000  in  notes  in  cir- 
culation and  only  $302,905   in  specie   for  their 
redemption.    The  bonds  held  in  the  State  treas- 
ury  to  secure  payment  of  the  notes  were  chiefly 
bonds  of  the  Southern  States.    As  they  seceded 
their  bonds  fell  in  value;    even  bonds  of  the 
United  States  fell  to  a  heavy  discount.     The  peo- 
ple lost  a  large  per  cent  of  the  face  value  of  this 
"  stumptail  "  money,  and  were  left  without  a  cur- 
rency.     The    prostration    was    complete.      The 
paper  money  issued  out  of  the  National  Treasury' 


VALUE. 


177 


was  about  the  first  good  money  which  the  people 
of  Illinois  ever  had,  and  enabled  them  to  show 
their  hand  and  make  their  mark  in  the  war 


la 


A  NATIONAL  CURRENCY. 


The  war  of  secession  caused  its  adoption  and 
the  suppression  of  paper  money  issued  under 
State  authority. 

Mr.  Lincoln  was  elected  President  in  the  fall 
of  i860,  and  thereupon  the  Southern  States 
attempted  to  secede  from  the  Union,  and  to  that 
end  combined  as  the  Confederate  States.  On 
April  14,  1 86 1,  Fort  Sumter  surrendered  to  the 
rebels,  and  thereupon  the  President  issued  a  call 
for  75,000  men  ;  also  for  a  special  session  of  Con- 
gress, to  meet  July  4,  1861.  In  May,  1861,  he 
called  for  thirty-nine  volunteer  regiments  of 
infantry  and  one  of  cavalry  ;  also  directed  an 
increase  of  the  regular  army  by  eight  regiments 
of  infantry,  one  of  artillery,  one  of  cavalry,  and 
the  enlistment  of  13,000  seamen. 

Congress  met  July  4,  1861.  The  Union  army 
was  defeated  at  Bull  Run  July  21,  1861,  and  there- 
upon Congress  authorized  the  enlistment  of  500,- 
000  volunteers.  In  August,  1861,  the  Confederate 
Congress  authorized  the  Confederate  President 
to  accept  the  services  of  400,000  volunteers,  to 
serve  not  less  than  one  nor  more  than  three  years. 

(178) 


A  NATIONAL  CURRENCY. 


179 


The  rebels  then  had  in  the  field  not  less  than 
210,000  men.  (McPherson's  "History  of  the 
Rebellion,"  p.  117.) 

Lee  surrendered  to  Grant  April  9,  1865,  and 
the  war  ended  soon  thereafter,  at  which  time 
the  Union  had  in  the  field  an  army  of  1,000,016 
men  and  a  navy  of  530  vessels  of  all  kinds, 
armed  with  3,000  guns  and  manned  by  51,000 
men.  The  public  debt,  which,  on  June  20,  i860, 
was  $64,769,703.08,  on  August  31,  1865,  was 
$2,845,907,626.56  ("United  States  Notes,"  Knox, 
pp.  72  and  85),  a  condition  of  things  quite  differ- 
ent from  that  existing  in  March,  1861,  when 
treason  and  rebellion  beleagured  Washington, 
and  Mr.  Lincoln  was  forced  to  reach  it  in  dis- 
guise. 

Pursuant  to  an  act  of  Congress  of  July  17, 186 1, 
authorizing  a  loan  of  $250,000,000,  and  an  act  of 
August  5,  1 86 1,  supplementary  thereto,  the  Secre- 
tary of  the  Treasury  (Mr.  Chase),  on  August  15, 
1 86 1,  effected  an  arrangement  with  the  associated 
banks  of  Boston,  New  York,  and  Philadelphia,  by 
which  they  agreed  to  take  fifty  millions  of  the 
loan  in  three-year  Treasury  notes,  bearing  7.3  per 
cent  interest,  payable  semi-annually,  with  the  priv- 
ilege to  take  a  like  amount  on  October  15th,  then 
next,  and  another  like  amount  on  December  1 5th 
following.  In  aid  of  the  loan  as  agreed,  the  Sec- 
retary caused  books  of  subscription  to  be  opened 
throughout  the  country  and  the  people  subscribed 
liberally,  so  that  the  banks  took  the  second  fifty 


n 


180 


A  NATIONAL  CURRENCY. 


millions  in  similar  notes,  and  on  November  i6, 

1 86 1,  took  the  third  fifty  millions  in  twenty-year 
6  per  cent  bonds,  at  a  rate  equivalent  to  bonds 
bearing  7  per  cent,  payable  semi-annually. 

Demand  Notes.  Also,  the  above  acts  authorized 
the  Secretary,  as  a  part  of  the  loan,  to  issue  in 
exchange  for  coin,  or  in  payment  of  salaries  and 
other  dues  from  the  United  States,  Treasury 
notes  of  denominations  not  less  than  $5,  not  bear- 
ing interest  but  payable  on  demand  and  receiv- 
able for  all  public  dues,  to  an  amount  not  exceed- 
ing $50,000,000,  and  reissuable  until  December  31, 

1862.  In  form  these  notes  were:  "On  demand 
the    United  States    promise  to    pay    the  bearer 

dollars."  They  were  the  first  paper  money 

issued  directly  out  of  the  Treasury.  The  ordinary 
Treasury  notes  were  in  large  denominations,  pay- 
able after  a  time  specified,  to  the  order  of 

and  bearing  interest. 

Congress  met  in  regular  session  December  2, 

1 86 1,  and  the  Secretary,  in  his  report  thereto,  esti- 
mated that,  if  the  war  continued,  the  public  debt, 
which  was  $90,867,828  on  July  i,  1861,  would  be 
five  hundred  and  seventeen  millions  on  July  i, 

1862,  and  eight  hundred  and  ninety-seven  millions 
on  July  I,  1863,  and  also  said:  ** To  enable  the 
Government  to  obtain  the  necessary  means  for 
prosecuting  the  war  to  a  successful  issue,  without 
unnecessary  cost,  is  a  problem  which  must  engage 
the  most  careful  attention  of  the  Legislature. 
The  Secretary  has  given  to  this  problem  the  best 


A  NATIONAL  CURRENCY. 


181 


consideration  in  his  power,  and  now  begs  leave  to 
submit  to  Congress  the  result  of  his  reflections." 
"The  circulation  of  the  banks  of  the  United 
States  on  January  i,  1861,   was  computed  to  be 
$202,000,767,  of  which  $150,000,000,  in  round  num- 
bers, was  in  the  States  now  loyal.    The  whole  of 
this  circulation  constitutes  a  loan  without  interest 
from  the  people  to  the  banks,  costing  them  noth- 
ing except  the  expense  of  issue  and  redemption 
and  the  interest  on  the  specie  kept  on  hand  for 
the  latter  purpose;  and  it  deserves  consideration 
whether  sound  policy  does  not  require  that  the 
advantages  of  this  loan  be  transferred,  in  part  at 
least,  from  the  banks,  representing  only  the  inter- 
ests of  the  stockholders,  to  the  Government,  rep- 
resenting the    aggregate  interests  of  the  whole 
people.    It  has  been  well  questioned  by  the  most 
eminent  statesmen  whether  a  currency  of  bank 
notes  issued  by  local  institutions  under  State  laws 
is  not  in  fact  prohibited  by  the  National  Consti- 
tution.   Such  emissions  certainly  fall  within  the 
spirit,  if  not  within  the  letter,  of  the  constitutional 
prohibition  of  the  emission  of  "  bills  of  credit "  by 
the  States  and  of  the  making  by  them  of  any- 
thing except  gold  and  silver  coin  a  legal  tender 
in  payment  of  debts." 

"  However  this  maybe,  it  is  too  clear  to  be  reas- 
onably disputed  that  Congress,  under  its  powers 
to  lay  taxes,  to  regulate  commerce,  and  to  regu- 
late the  value  of  coin,  possesses  ample  authority 
to  control  the  credit  circulation  which  enters  so 


:t 


182 


A  NATIONAL  CURRENCY. 


A  NATIONAL  CURRENCY. 


183 


largely  into  the  transactions  of  commerce,  and 
affects  in  so  many  ways  the  value  of  coin.    In  the 
judgment  of  the  Secretary,  the  time  has  arrived 
when  Congress  should  exercise  this  authority. 
The  value  of  the  existing  bank-note  circulation 
depends  on  the  laws  of  thirty-four  States  and  the 
character  of  some  sixteen  hundred  private  cor- 
porations.    It  is    usually  furnished    in  greatest 
proportions  by  institutions  of  least  actual  capital ; 
circulation,  commonly,  is  in  the  inverse  ratio  of 
solvency.    Under  such  a  system,  or  lack  of  sys- 
tem,  great  fluctuations  and  heavy  losses  in  dis- 
counts    and  exchanges   are  inevitable,  and  not 
infrequently,  through  failure  of  the  issuing  insti- 
tutions,  considerable  portions  of  the  circulation 
become  suddenly  worthless  in  the  hands  of  the 
people.    The  recent  experience  of  several  States 
m  the  valley  of  the  Mississippi  painfully  illus- 
trates  the  justice  of  these  observations,  and  en- 
forces,  by  the  most  cogent,  practical  arguments, 
the  duty  of  protecting  commerce  and   industry 
against  the  recurrence  of  such  disasters.    The 
Secretary  thinks  it  is  possible  to  combine  with 
this  protection  a  provision  for  circulation,  safe  to 
the  community  and  convenient  for  the  Govern- 
ment." 

"  Two  plans  for  effecting  this  object  are  sug. 
gested.  The  first  contemplates  the  gradual  with- 
drawal from  circulation  of  the  notes  of  private 
corporations,  and  for  the  issue  in  their  stead  of 
United  States  notes  payable  in  coin  on  demand, 


in  amounts  sufficient  for  the  useful  ends  of  a  rep- 
resentative currency.  The  second  contemplates 
the  preparation  and  delivery  to  institutions  and 
associations,  of  notes  prepared  for  circulation 
under  national  direction,  and  to  be  secured  as  to 
prompt  convertibility  into  coin  by  the  pledge  of 
United  States  bonds  and  other  needful  regula- 
tions." 

"  The  first  of  these  plans  was  partially  adopted 
at  the  last  session  of  Congress,  in  the  provision 
authorizing  the  Secretary  to  issue  United  States 
notes  payable  in  coin.    This  provision  may  be  so 
extended  as  to  reach  the  average  circulation  of 
the  country,  while    a    moderate    tax,  gradually 
augmented,    on    bank    notes,    will    relieve    the 
national  from  the  competition  of  local  circula- 
tion.   It  has  already  been  suggested  that  the  sub- 
stitution of  a  national  for  a  State  currency  upon 
this  plan  would  be  equivalent  to  a  loan  to  the 
Government  without  interest,  except  on  the  fund 
to  be  kept  in  coin,  and  without  expense  except 
the  cost  of  preparation,  issue,  and  redemption ; 
while    the    people    would    gain    the    additional 
advantage  of  a  uniform  currency,  and  relief  from 
a  considerable  burden  in  the  form  of  interest  on 
debt."     But  he   saw  the   specter  of   continental 
money,  and  for  that  and  other  reasons  preferred 
his  second  plan,  i.  e..  National  bank  notes. 

On  or  just  prior  to  December  31,  1 86 1,  all  the 
banks  then  doing  business  suspended  specie  pay- 
ments, and  notes  of  any  kind  "  payable  in  coin  on 


184 


A  NATIONAL  Cl/RKENCY. 


A  NATIONAL  CURRENCY. 


185 


lii 


demand"   were    postponed    into    the    indefinite 
tuture.    The  war  was  to  be  prosecuted,  if  at  all 
with  an  irredeemable  paper  currency. 

At  that  time  the  outstanding  bank  circulation 
was  $183,000,000  and  their  specie  reserve  $102  000  - 
000  ("Money  in  Politics,"  by  J.  K.Upton,  late  Assist- 
ant  Secretary  of  the  Treasury,  p.  74).    The  banks 
of  New  York  alone,  according  to  the  president  of 
one  of  them  then  held  over  $40,oo«,ooo  in  specie 
(  Money,  Its  Laws  and  History,"  by  H  V  Poor  o 
56.).     Mr.  Blaine  ("Twenty  Years  in  Congrei/' 
Vol.  I,  Chap.  19)  said:    "  At  the  opening  of  the 
year  1862  the  Government  finances  were  in  a  crit 
ical  condition.     Confederate  bonds  were  more 
popular  in  England  than  the  bonds  of  the  United 
^\T'    '^l^^.^^^'^ers  of  Europe,  with  the  Roths- 
childs  at  their  head,  would  not  touch  our  securi- 
ties    We  were  thrown  on  our  own  resources. 
With  one  hundred  millions  of  coin  in  the  banks 
and  one    hundred   and    fifty  millions    hoarded 
among  the  people,  it  was  obviously  impossible  to 
conduct  the  business  of  the  country  and  to  carrv 
on  the  war  in  cash  payments." 

The  coinage  of  gold  at  the  mint  prior  to  1862 
jas  $545,150,625.50,  or  about  $540,000,000  after 
deducting  recoinages ;  in  silver  there  was  onlv 
that  coined  during  the  period  1853-61,  to  wit 
$49,642,031   in   fractional  silver  tokens.     About 
$340,000,000  in  gold  coin  had  been  expelled  from 
the  country  previous  to    1862,   by  stuffing  the 
currency  with  State  bank  notes.    The  eagles  on 


this  amount  of  gold  coin  had  flown  away  to  the 
same  roost  abroad  to  which  the  **  dollars  of  the 
daddies"  had  previously  resorted.  Had  all  the 
gold  and  silver  coined  previous  to  1862  remained 
in  the  country,  and  there  had  been  no  bank  notes, 
it  would  not  have  been  so  obviously  impossible  to 
maintain  specie  payments  during  the  war.  During 
the  period  1862-5  there  was  coined  at  the  mint,  in 
gold,  $91,698,032,  and  in  silver  $3,362,706,  being 
of  the  domestic  product  during  that  time. 

The  panic  of  1857  had  thinned  out  the  bank- 
note currency.  But  if  the  banks  doing  business 
on  December  31,  1861,  had  a  circulation  of  $183,- 
ocx),ooo  and  a  specie  reserve  of  $100,000,000,  it  was 
manifestly  dishonest  for  them  to  suspend  specie 
payments  and  hold  the  coin  for  sale  thereafter  at 
a  premium.  They  never  resumed  payment  in  coin. 
They  locked  up  their  specie  as  a  "  precautionary 
measure !  ** 

When  the  demand  notes  were  first  issued  in 
August,  1 86 1,  the  associated  banks  refused  to 
receive  them  except  on  special  deposit.  And  in 
January,  1862,  after  specie  payments  were  sus- 
pended, the  associated  banks  resolved  that  before 
we  receive  the  demand  notes  on  deposit  we  must 
require  that  such  legal  provision  be  made  by 
Congress  as  shall  insure  their  speedy  redemption 
("  United  States  Notes,"  Knox,  Chap.  9.)  These 
notes  competed  with  their  bank  notes  as  a  circu- 
lating medium,  were  receivable  for  duties  on 
imports  and  all  public  dues,  while  their  suspended 


186 


A  NATIONAL  CURRENCY. 


bank  notes  were  not  legally  receivable  for  any- 
thing. 

In  February,  1862,  6  per  cent  United  States 
bonds  were  selling  in  the  market  at  88,  and  5  per 
cents  at  y^yi  ("  United  States  Notes,"  Knox,  p.  97), 
and  these  prices  were  in  depreciated  bank  notes! 
Greenbacks.     By  the  act  of  February  25,  1862, 
the   Secretary   of  the    Treasury  was  authorized 
to    issue    $150,000,000    of    United    States    notes 
(greenbacks),   not    bearing   interest,  paj^able  to 
the    bearer    at    the    Treasury    of    the    United 
States,  of    such    denominations,   not    less    than 
$5,  as  he   might  deem   expedient,  which  notes 
were  made  receivable  in  payment  for  all  dues 
to  the  United  States  except  duties  on  imports, 
and    of    all  claims    and    demands    against    the 
United  States  except  for  interest  on  the  public 
debt,  which  shall  be  paid  in  coin,  and  which  notes 
were  made  lawful  money  and  a  legal  tender  in 
payment  of  all  debts,  public  and  private,  within 
the  United  States,  except  duties  on  imports  and 
interest  as  aforesaid ;  the  notes  to  be  fundable  into 
6  per  cent  bonds ;  to  be  received  at  their  par  value 
in  payment  for  any  loans  thereafter  negotiated ; 
and  to  be  reissued  from  time  to  time  as  the  exi- 
gencies of  the  public  interest  may  require. 

And  to  enable  the  Secretary  to  fund  the  Treas- 
ury notes  and  floating  debt  he  was  authorized  to 
issue  and  sell  not  exceeding  five  hundred  millions 
of  6  per  cent  five-twenty  bonds. 

And  the  act  further  provided  that  duties  on 


A  NATIONAL  CURRENCY. 


187 


imported  goods  should  be  paid  in  coin  or  in  the 
demand  notes  theretofore  authorized,  which  coin 
should  be  a  special  fund  to  be  applied  first  to  the 
payment  in  coin  of  interest  on  the  public  debt^ 
and  secondly  as  a  sinking  fund,  etc.,  as  in  the  act 
specified. 

In  pursuance  of  this  financial  policy  all  interest 
on  the  funded  debt  was  regularly  paid  in  coin. 

In  January,  1862,  after  the  bill  was  introduced 
in  Congress  which  resulted  in  the  act  above  re- 
ferred to,  the  associated  banks  of  Boston,  New 
York,  and  Philadelphia  sent  a  powerful  lobby  to 
Washington  to  oppose  it  and  the  schemes  of  the 
Secretary.  In  his  report  he  had  proposed  to  na- 
tionalize the  currency.  The  whole  State  bank 
system  was  opposed  to  it,  and  were  violently  op- 
posed to  all  irredeemable  paper  money  except 
their  own.  The  offer  of  the  National  bank  system 
under  National  control  failed  to  placate  banks 
whose  issues  were  under  less  control.  They  pro- 
posed a  plan,  to  wit :  No  legal-tender  notes  and 
no  more  demand  notes ;  the  Government  to  be- 
come one  of  their  customers  and  keep  its  deposits 
with  them,  checking  out  the  money  as  occasion 
might  require ;  bonds  to  be  issued  and  sold  for 
whatever  they  might  bring,  with  power  in  the 
Secretary  to  hypothecate  bonds  as  security  for 
loans,  which,  if  not  paid  at  maturity,  the  bonds 
might  be  sold  to  the  highest  bidder.  All  the 
banks  in  the  States  of  Massachusetts,  New  York, 
and  Pennsylvania  then  had  a  circulation  of  about 


188 


A  NATIONAL  CURRENCY, 


m. 


I 


$66,ooo,cxx),  and  this  they  either  could  not  or 
would  not  redeem.     The  expenses  of  the  war 
were  then  running  on  an  average  of  $2,000,000 
per  day.     ("  History  of  the  Legal  Tender  Paper 
Money,"    etc.,  by  E.  G.  Spaulding,   chairman  of 
the  Sub-committee  of  Ways  and  Means  at  that 
time.)      The  plan   of    these    confederate  banks 
failed  and  their  officers  went  home,  not  to  pay 
their  suspended  paper  money,  but  to  inflate  it. 
State  bank  notes  in  the  war  of  181 2  had  "para- 
lyzed the  National  arm  and  sullied  the  faith,  both 
public  and  private,  of  the   United  States.''     In 
the  crisis  of  1861-65,  the  men  at  the  helm  did  not 
intend  to  allow  the  National  cause  to  be  swamped 
by  State  bank  money. 

The  Secretary  of  the  Treasury  (Mr.  Chaser,  in  a 

letter  addressed  to  Mr.  Stevens,  chairman  of  the 

Committee  of  Ways  and  Means,  after  expressing 

his  great  aversion  to  making  anything  but  coin  a 

legal  tender  in  payment  of  debts,  said:     "It  is, 

however,  at  present  impossible,  in  consequence  of 

the  large  expenditures  entailed  by  the  war,  and  the 

suspension  of  the  banks,  to  procure  sufficient  coin 

for  disbursements ;  and  it  has,  therefore,  become 

indispensably  necessary  that  we  should  resort  to 

the  issue  of  United  States  notes.     The  making 

them  a  legal  tender  might  still  be  avoided,     *    * 

but  unfortunately  some  persons  and  institutions 

refuse  to  receive  and  pay  them,"  etc.    And  in  a 

letter  to  Mr.  Spaulding,  dated  February  3,  1862, 

the  Secretary  said :     "  It  is  true  that  I  came  with 


A  NATIONAL  CURRENCY. 


189 


reluctance  to  the  conclusion  that  the  legal-tender 
clause  is  a  necessity,  but  I  came  to  it  decidedly 
and  I  support  it  earnestly.  *  *  The  Treasury 
is  nearly  empty.  I  have  been  obliged  to  draw  for 
the  last  installment  of  the  November  loan ;  so 
soon  as  it  is  paid,  I  fear  the  banks  generally  will 
refuse  to  receive  the  United  States  notes.  You 
will  see  the  necessity  of  urging  the  bill  through 

without  more  delay-" 

In  the  debate  on  the  bill,  Mr.  Hooper,  one  of 
the  committee  of  Ways  and  Means,  said  in  the 
House :     "  The  levying  of  the  contemplated  tax, 
the    proper  inauguration  of    the   new  banking 
system,  and  the  successful  negotiation  of  a  new 
loan  are  matters  that  will  require  time.     In  the 
meantime  the  treasury  is  comparatively  empty, 
and  the  demands  of  the  Government  are  numer- 
ous and  pressing.    *    *    *    There  is  a  necessity 
for  money,  and  the  object  of  the  authority  to  issue 
$150,000,000  of  United    States    notes    is  to  pay 
the  creditors  of  the  United  States  and  enable 
them  to  discharge  their  debts.    The  propositions 
of  committees  from  boards  of  trade  and  banks, 
which  recently  visited  Washington,  differed  from 
the  theory  of  this  bill  so  far  as  to  require  that 
instead  of  the  issue  of  the  United  States  notes 
the  banks  should  be  relied  upon  to  furnish  the 
amount  needed.     The   effect  of    this  would  be 
that  the  Government  bonds  must  first  be  disposed 
of,  without  restriction  as  to  the  rate  or  terms, 
taking  the  notes  of  suspended  banks  in  payment 


190 


A  NATIONAL  CURRENCY. 


of  these  bonds,  and  with  these  bank  notes  pay  off 
the  contractors.    The  obvious  effect  of  such  an 
arrangement  would  be  to  put  the  reins  of  our 
National  Government  in  the  hands  of  the  banks 
Exactly  upon  what  terms  the  Government  bonds 
could  now  be  disposed  of,  no  one  can  say  but 
last  summer,  when  the  banks  made  their  negotia- 
tion  with  the  Secretary  of  the  Treasury,  they  at 
first  refused  to  do  anything  because  the  Secretary 
was  restricted  by  law  to  taking  par  for  7  per  cent 
bonds,  payable  in  twenty  years,  and  for  7.3  Treas- 
ury  notes  payable  in  three  years.    They  finally 
decided,  with  great  reluctance,  to  take  $100,000,000 
of  the  latter,  though  at  the  time  money  was  not 
worth  for  commercial  purposes  more  than  5  per 
cent.    In  the  war  of  1812  the  Government  paid 
for  Its  supplies  with  funds  obtained  from  the 
banks  in  the  manner  as  proposed   in  the  plan 
recently  submitted  to  the  Secretary  by  those  com- 
mittees.    The  bonds  of  the  United  States  were 
then  negotiated  in  some  instances  at  20  per  cent 
less  than  their  par  value,  and  paid  in  bank  cur- 
rency of  different  degrees  of  depreciation,  accord- 
mg  to  locality,  but  averaging  from  20  to  25  per 
cent  discount  as  compared  with  coin.    *    *    *    We 
shall  probably  be  told  that  England,  in  her  great 
struggle  while  specie  payments  were  suspended, 
never  made  paper  money  a  legal  tender,    *    ♦ 
but  instead  of  doing  this  she  did  worse  by  sus- 
pending  the  laws  to  enforce  payment  of  debts  in 
cases  where  the  paper  money  had  been  refused 


A  NATIONAL  CURRENCY. 


191 


as  a  tender."    C'  History  of  Legal  Tender  Notes," 
by  E.  G.  Spaulding,  p.  54.) 

Trustworthy  reports  from  eighteen  different 
States  show  that  in  i860,  out  of  1,230  banks,  140 
were  broken,  234  closed,  and  131  worthless.  There 
were  in  existence  at  that  time  3,000  kinds  of 
altered  notes,  1,700  varieties  of  spurious  notes,  460 
varieties  of  imitation,  and  over  700  of  other  kinds 
more  or  less  fraudulent.  The  various  kinds  of 
genuine  bills  in  circulation  were  about  7,000. 
The  use  of  bank-note  detectors  was  necessary  in 
order  to  ascertain  the  genuineness  of  notes,  and 
the  solvency,  or  the  existence  even,  of  the  banks 
of  which  they  purported  to  be  the  issue.  ("  Money 
and  Politics,"  Upton,  p.  112.) 

In  1 862  all  the  banks  were  in  a  state  of  suspen- 
sion. Without  a  reliable  bank-note  detector  of 
the  latest  issue,  no  one,  although  an  expert,  could 
have  discovered  whether  the  "rags  and  lamp- 
black" offered  to  him  were  worth  anything  at  all 
or  not.  Dishonored,  depreciated,  and  doubtful 
bank  notes  would  have  been  poor  stuff  to  offer  the 
Union  soldier  for  his  blood. 

The  demand  notes  were  made  a  legal  tender 
by  the  act  of  March  17,  1862.  When  first  issued, 
although  they  were  receivable  for  all  public  dues 
and  were  paid  in  coin  on  demand,  the  State  banks 
refused  to  receive  them  as  current  money,  because 
these  notes  competed  with  their  issues  and 
impaired  their  monopoly  of  the  paper  currency. 
But  they  were  compelled  to  accept  legal  tenders 


192 


A  NATIONAL  CURRENCY. 


in  payment  of  debts  due  them  and  were  thereby 
forced  to  treat  them  as  current  money.  But  bank- 
ers have  never  ceased  to  rail  at  the  greenbacks, 
because  the  people  get  the  benefit  of  this  paper 
circulation,  and  not  them.  If  they  could  issue 
paper  money,  and  greenbacks  were  not  a  legal 
tender,  they  would  soon  cease  to  be  bankable,  and 
be  thereby  crowded  out  of  circulation. 

A  greenback  is  a  promise  to  pay  dollars  without 
saying  when.  At  first,  it  meant  payment  in  coin 
when  the  Government  was  able  ;  and  the  people 
made  it  able.  Since  January  i,  1879,  the  United 
States  note  has  meant  payment  in  gold  on  de- 
mand. To  the  people  it  was  always  acceptable, 
at  home  or  in  the  field— also  to  the  rebels.  Its 
only  enemies  were,  and  are,  the  friends  and 
issuers  of  bank  notes. 

An  additional  amount  of  $150,000,000  in  legal 
tender  United  States  notes  was  authorized  July 
II,  1862,  of  such  denominations  as  the  Secretary 
of  the  Treasury  might  deem  expedient;  but  none 
to  be  issued  for  the  fractional  part  of  a  dollar, 
and  not  more  than  $35,000,000  of  lower  denomi- 
nations than  $5.  Not  less  than  $50,000,000  to  be 
reserved  and  held  to  secure  prompt  payment  of 
the  temporary  deposits  mentioned  in  the  act,  and 
to  be  issued  and  used  only  when  needed  for  that 
purpose. 

By  a  joint  resolution  approved  January  17, 
1863,  to  provide  for  the  immediate  payment  of 
the  army  and  navy,  the  Secretary  of  the  Treasury 


A  NATIONAL  CURRENCY. 


193 


was  authorized,  if  required  by  the  exigencies  of 
the  public  service,  to  issue  an  additional  $100,- 
000,000  of  legal  tender  United  States  notes,  of 
such  denominations  not  less  than  $1  as  he  may 
prescribe.  This  amount  was  increased  to  $150,- 
000,000  by  the  act  of  March  3,  1863. 

Mr.  Lincoln,  as  President,  in  giving  his 
approval  to  this  joint  resolution,  said:  "While 
giving  this  approval,  however,  I  think  it  my  duty 
to  express  my  sincere  regret  that  it  has  been 
found  necessary  to  authorize  so  large  an  addi- 
tional issue  of  United  States  notes  when  this  cir- 
culation and  that  of  the  suspended  banks  together 
have  become  already  so  redundant  as  to  increase 
prices  beyond  real  values,  thereby  augmenting 
the  cost  of  living,  to  the  injury  of  labor,  and  the 
cost  of  supplies,  to  the  injury  of  the  whole  coun- 
try. It  seems  very  plain  that  the  continued  issue 
of  United  States  notes,  without  any  check  to  the 
issues  of  suspended  banks,  and  without  adequate 
provision  for  the  raising  of  money  by  loans,  and 
for  funding  the  issues  so  as  to  keep  them  within 
due  limits,  must  soon  produce  disastrous  conse- 
quences. That  Congress  has'  power  to  regulate 
the  currency  of  the  country  can  hardly  admit  of 
a  doubt ;  and  that  a  judicious  measure  to  prevent 
the  deterioration  of  this  currency,  by  a  reasonable 
taxation  of  bank  circulation  or  otherwise,  is 
needed,  seems  equally  clear.  Independently  of 
this  general  consideration,  it  would  be  unjust  to 

the  people  at  large  to  exempt  banks  enjoying  the 
la 


194 


A  NATIONAL  CURRENCY. 


m% 


'HI; 


special  privilege  of  circulation   from  their  just 
proportion  of  the  public  burdens.** 

Mr.  Blaine  (**  Twenty  Years  in  Congress,'*  Vol. 
I,  Chap.  22)  said :  "  The  Secretary  of  the  Treasury 
had  not  failed  to  see  that  a  constant  conflict  and 
damaging  competition  must  ensue  between  the 
currency  of  the  nation  and  the  currency  of  State 
banks.  It  was  the  course  of  the  banks  more  than 
any  other  agency  that  had  discredited  the  demand 
notes,  and  demonstrated  the  absolute  necessity  of 
imparting  the  quality  of  legal  tender  to  the  paper 
issued  by  the  Government.  As  this  paper  took 
the  place  of  gold  and  silver  in  all  payments 
except  duties  on  imports  and  interest  on  the  pub- 
lic debt,  it  was  easy  for  the  State  banks  to  extend 
their  circulation,  which  they  did  to  a  dangerous 
extent.  The  enactment  of  the  legal-tender  bill 
had  not,  therefore,  given  the  control  of  the  cur- 
rency to  the  Government.  It  had  only  increased 
the  dangers  of  inflation  by  the  stimulus  it 
imparted  and  the  protection  it  afforded  to  the 
circulation  of  State  bank  notes." 

But  the  war  declared  by  Secretary  Chase 
against  this  kind  of  Confederate  money  was  very 
feebly  conducted  by  him.  The  National  bank 
act  of  1863  imposed  a  tax  of  2  per  cent  annu- 
ally  on  the  circulation  of  National  and  none 
on  that  of  State  banks ;  but  a  similar  and  lighter 
tax  was  imposed  on  the  latter  by  the  act  of 
March  3,  1863.  The  National  bank  act  of  June 
3,  1864,  taxed  both   kinds  of  bank   notes  alike. 


A  NATIONAL  CURRENCY. 


195 


And  it  was  not  until  the  act  of  March  3,  1865, 
amendatory  to  prior  internal  revenue  acts,  that  a 
tax  of  10  per  cent  was  imposed  on  the  amount 
of  State  bank  notes  paid  out  after  July  i,  1866. 
Lee  surrendered  to  Grant  April  9,  1865,  and  the 
war  ended  soon  thereafter. 

National  Bank  Notes.  Although  a  dollar  in 
coin  was  worth  from  $1.28^  to  $1.34  in  paper 
money  in  December,  1862,  Secretary  Chase 
urged  his  National  bank  scheme  upon  Con- 
gress, and  the  bank  act  of  February,  25,  1863, 
was  passed  by  a  small  majority.  The  scheme 
failed  to  furnish  a  market  for  bonds.  Up  to 
December  10,  1863,  134  banks  had  been  organ- 
ized under  the  act,  chiefly  in  the  West,  with 
an  aggregate  capital  of  $16,000,000.  The  people 
took  the  first  five  hundred  million  loan  of  6  per 
cent  bonds  at  par,  in  paper  money,  in  the  summer 
of  1863.  More  recently,  Mr.  Cleveland  found  that 
the  people  could  be  relied  upon  to  take  a  loan 
when  directly  offered  to  them. 

At  the  instance  of  Secretary  ChavSe,  the  bank 
act  of  1 863  was  revised,  amended,  and  reenacted 
June  3,  1864,  during  which  month  a  dollar  in  coin 
was  worth  from  $1.93  to  $2.50  in  paper  money. 
Bank  notes  not  exceeding  in  amount  $300,000,000 
were  to  be  issued  to  the  banks  organized  under 
it,  they  to  deposit  United  States  bonds  with  the 
Treasurer  of  the  United  States,  and  thereupon 
receive  from  the  Comptroller  of  the  Currency 
notes  not  exceeding  90  per  cent  of  the  amount  of 


196 


A  NATIONAL  CURRENCY. 


the  bonds  at  the  par  value  thereof,  if  bearing 
interest    at    the    rate  of    not  less    than    5    per 
cent  per  annum,  such  notes  to  be  of  denomina- 
tions  of  $1,  $2,  $3,  $5,  $10,  $20,  $50,  $100,  $500, 
and  $1,000;  not  more  than  one-sixth  of  the  notes 
to  be  of  less  denominations  than  $5,  and,  after 
specie  payments  were  resumed,  none  to  be  less 
than  $5.     The  notes  were  made  redeemable  in 
lawful  money,  and  also  "  shall  be  receivable  at 
par  in  all  parts  of  the  United  States  in  payment 
of  taxes,  excises,  public  lands,  and  all  other  dues 
to  the  United  States,  except  duties  on  imports, 
and  also  for  salaries  and  all  other  debts  and  demands 
owing  by  the  United  States  to  individuals,  corpo- 
rations,  and  associations  within  the  United  States, 
except  interest  on  the  public  debt  and  in  redemp- 
tion of  the  National  curency."   It  seems,  therefore, 
that  Mr.  Chase  thought  a   bank  note  could  be 
made  a  lawful  tender  from  as  well  as  to  the  Gov- 
ernment, although  as  Chief  Justice  he  denied  the 
power  of  Congress  to  make  a  United  States  note 
a  legal  tender.     The  National  bank  notes  were 
made  a  forced  currency,  probably  because  it  was 
feared  that  they  would  not  circulate  without  it. 

By  the  act  of  July  12,  1870,  the  limit  was 
increased  from  three  hundred  to  three  hundred 
and  fifty-four  millions,  and  still  further  by  the 
act  of  January  14,  1875. 

The  independent  Treasury  act  of  August  6, 
1846,  proved  to  be  the  financial  salvation  of  the 
Government  in  the  Civil  War,  which  was  com- 


A  NATIONAL  CURRENCY. 


197 


menced  on  a  specie  basis,  and  duties  payable  in 
coin  furnished  the  means  to  pay  interest  on  the 
public  debt  in  coin.  But  by  the  above-mentioned 
acts,  bank  notes  redeemable  in  nothing  except 
greenbacks  were  bred  and  nursed  in  the  Treas- 
ury, and  made  a  legal  tender  to  and  from  the 
Government,  as  above  stated. 

Mr.  Chase  left  the  Treasury  June  7,  1864,  and 
Mr.  Fessenden  became  his  successor  July  5,  1864. 
In  his  report  of  December  6,  1864,  he  said: 
"The  necessities  of  former  years  have  led  to 
many  expedients,  as  is  apparent  from  the  diversity 
of  forms  which  our  securities  present.  As  the 
debt  increases  from  year  to  year,  borrowing  be- 
comes more  difficult.  Embarrassed  as  the  country 
is  with  two  systems  of  banking,  and  obstructed  as 
the  Government  is  by  a  currency  wholly  beyond 
its  control,  it  is  manifest  that  to  push  its  own  cir- 
culation far,  if  at  all,  beyond  its  present  limit, 
could  only  be  justified  by  extreme  necessity.  The 
returns  on  file  show  that  the  whole  circulation  of 
the  State  banks  on  January  i,  1864,  was  $169,916- 
129.  The  total  amount  issued  to  National  banks, 
to  November  22,  1864,  was  $65,160,210.  The 
diminution  of  State  bank  issues  deducted  from 
the  National  bank  issues  left  an  increase  of  over 
$21,000,000  in  bank  circulation  during  the  year. 
Under  these  circumstances,  the  Secretary  thought 
it  advisable,  in  order  to  meet  pressing  emergencies, 
to  borrow,  upon  bonds  or  notes  authorized  by  the 
different  acts  referred  to,  $50,000,000  of  the  banks 


mm 


f 


198 


A  NATIONAL  CURRENCY. 


of  the  cities  of  New  York,  Philadelphia,  and  Bos- 
ton, and  met  the  representatives  of  a  large  num- 
ber of  these  institutions  in  New  York.  The 
result  proved,  however,  that  notwithstanding  a 
professed  and,  as  the  Secretary  was  convinced,  a 
reasonable  desire  to  aid  the  Government,  these 
institutions  were  not  able  to  furnish  the  assist- 
ance required  upon  any  terms  which,  under  exist- 
ing provisions  of  law.  the  Secretary  felt  authorized 
to  accept." 

The  State  banks  had  inflated  their  suspended 
paper,  and  were  either  unable  or  unwilling  to 
make  a  loan  of  fifty  millions  on  any  lawful  terms. 
The  State  and  National  banks  were  then  reaping 
a  profit  of  not  less  than  fourteen  millions  annu- 
ally    from    their    circulation.      It    was    choking 
the    channels    of    circulation    to    the    prejudice 
of    the    National    cause.      Every     artifice    had 
been    used  to  keep  down  inflation  by  the  issue 
of  interest-bearing  paper,    such    as    seven-thirty 
notes.  6  per  cent  compound  interest  notes,  cer- 
tificates for  temporary  loans  and  of  indebtedness 
bearing    6    per  cent  interest.    The  times  were 
critical.     During  the  summer  of  1864  Sherman 
was  fighting  Johnson  among  the  mountains  of 
Georgia ;  Grant  was  fighting  Lee  on  the  road  to 
Richmond.     In  July,  1864,  gold  reached  its  high- 
est  point,  to  wit :     $2.85    in    paper.      Now  it  is 
obvious  that  if  there  had  been  no  bank  notes,  and 
in  lieu  thereof  there  had  been  United  States  notes, 
the  inflation  would  have  been  no  greater.    This 


^ 


A  NATIONAL  CURRENCY.  199 

would  have  given  the  Treasury  $235,076,339  of 
additional  funds,  bearing  no  interest.  The  Sec- 
retary would  not  have  felt  compelled  to  apply  to 
a  set  of  shylocks  for  a  loan,  and  be  refused.  The 
nation  was  fighting  for  life,  and  was  forced  to 
fight  on  credit  and  pay  high  rates  of  interest.  At 
the  same  time  the  banks  were  stuffing  the  cur- 
rency with  their  bank  notes  for  private  gain,  and 
did  this  in  a  great  National  crisis  involving  the 
country's  fate.  Sherman  took  Atlanta  September 
I,  1864,  and  then  marched  to  the  sea.  The  war 
was  at  an  end  in  the  spring  of  1865. 

The  Public  Debt.  The  union  forces  were  paid  off 
and  mostly  discharged  during  the  summer  of  1865. 
The  public  debt  was  at  its  maximum  August  31, 
1865,  to  wit:  $2,845,907,605,  of  which  $1,109,586,191 
was  in  funded  debt;  about  a  million  and  a  half  in 
matured  debt;  something  over  two  millions  in 
suspended  requisitions,  and  the  residue  was : 

United  states  legal- tender  notes $  433.160,569  00 

Compound  interest  legal -tender  notes  217,024,160  00 

Five  per  cent  legal-tender  notes 33.954.230  00 

Seven-thirty  notes 830,000,000  00 

Fractional  currency 26,344,742  51 

Temporary  loans 107,148,713  16 

Certificates  of  indebtedness 85 ,093,000  00 

Total  floating  debt $1,732,725,414  67 

("United  States  Notes,"  Knox,  Chap.  9.) 

On  June  30,  1865,  there  was  in  circulation  State 
bank  notes  to  the  amount  of  $142,919,638,  and 
National  bank  notes  to  the  amount  of  $146,137,- 
860;  total  of  bank  notes,  $289,057,498  (Statistical 


200 


A  NATIONAL  CURRENCY. 


A  NATIONAL  CURRENCY. 


201 


*| 


Abstract  of  the  United  States  for  1887,  P-  22), 
all  of  which  were  redeemable  in  nothing  unless 
in  greenbacks.  No  one  can  doubt  that  these  bank 
notes  inflated  and  depreciated  the  currency  quite 
as  much  as  the  same  amount  in  United  States 
notes  would  have  done. 

Contraction.    Mr.  Fessenden  had  been  succeeded 
by  Mr.  McCulloch  as  Secretary  of  the  Treasury. 
He  had  been  a  banker  in  Indiana :  also  Comp* 
troller  of  the  Currency  under  the  bank  act  of  1 864, 
and  was  an  ardent  promoter  of  the  National  bank 
scheme,  and  an  enemy  of  greenbacks.     In   his 
report  of  December  4,  1865,  he  said :  "The  reasons 
sometimes  urged  in  favor  of  United  States  notes 
as  a  permanent  currency  are  the  saving  of  interest 
and  their  perfect  safety  and  uniform  value.    The 
objections  to  such  a  policy  are  that  the  paper 
circulation    of    the    country  should   be   flexible, 
increasing  and  decreasing  according  to  the  re' 
quirements  of  legitimate  business,  while  if  fur- 
nished by  the  Government  it  would'  be   quite 
likely  to  be  governed  by  the  necessities  of  the 
Treasury  or  the  interest   of  parties  rather  than 
the  demands  of  commerce  and  trade."     And  he 
was   urgent  to  have  power  given  him  to    sell 
interest-bearing  bonds  for  the  purpose  of  retiring 
greenbacks,  and  by  the  act  of  April  12,  1866,  was 
authorized    to    retire    ten    millions    within    six 
months,  and  thereafter  at  the  rate  of  four  millions 
a  month. 

On  and  after  August  31, 1865,  there  was  a  float- 


ing  debt  of  over  $1,273,000,000,  two-thirds  of 
which  bore  interest  at  7.3  per  cent  per  annum, 
and  the  residue  at  6  per  cent,  excepting  a  small 
amount  bearing  interest  at  5  per  cent.  This  mass 
of  matured  and  rapidly  maturing  indebtedness 
was  large  enough  to  keep  any  ordinary  financier 
quite  busy  in  funding  it.  Probably  the  interest- 
bearing  legal-tender  notes  furnished  an  attractive 
reserve  for  his  pet  banks. 

But  the  retiring  of  greenbacks  was  stopped, 
and  finally,  by  an  act  of  May  31,  1878,  it  was  pro- 
vided that  it  should  not  be  lawful  for  the 
Secretary  of  the  Treasury,  or  other  officer  under 
him,  to  cancel  or  retire  any  more  of  the  United 
States  legal-tender  notes ;  and  when  the  same  may 
be  redeemed  or  received  into  the  Treasury  under 
any  law  or  from  any  source  whatever,  and  shall 
belong  to  the  United  States,  they  shall  not  be 
retired,  canceled  and  destroyed,  but  they  shall  be 
reissued  and  kept  in  circulation ;  new  notes  to  be 
issued  for  mutilated  ones,  which  were  thereupon 
to  be  canceled  and  destroyed.  Their  amount 
then  was  and  now  is  $346,681,016,  less  the  amount 
lost  or  destroyed  by  use  and  accident. 

On  June  30, 1878,  National  bank  notes  amounted 
to  $324,514,284,  and  on  June  30,  1882,  had  in- 
creased to  $358,742,034  (Statistical   Abstract  for 

1887,  p.  22). 

During  the  war  and  since,  the  people  were 
taxed  to  pay  interest  in  gold  on  the  bonds  held  to 
secure  payment  of  these  notes  in  greenbacks,  and 


202 


A  NATIONAL  CURRENCY. 


. 


in  addition  the  banks  have  reaped  a  profit 
annually  of  millions  upon  the  notes  in  discounting- 
commercial  paper,  in  consideration  of  which  these 
banks  have  assisted  in  inflating  and  depreci- 
ating the  currency.  Also  a  bureau  was  erected 
in  the  Treasury,  with  a  Comptroller  of  the  Cur- 
rency at  its  head,  for  the  purpose  of  nursing  and 
managfing  this  unjust  scheme. 

The   average    circulation    of    the    State   and 
National  banks  taken  together,  from  1862  to  1890, 
was  over  three  hundred  millions  of  dollars.     If 
their  place  had  been  occupied  by  United  States 
notes,  the  paper  inflation  would  have  been    no 
greater  during  the  war,  and  the  resumption  of 
specie  payments  afterward  would  have  been  quite 
as   easy.     The  limit  of  paper  inflation  was  fast 
approaching  in  1864,  and  it  is  obvious  that  the 
risk  of  financial  collapse  would  have  been  less  if 
State  bank  notes  had  been  taxed  out  of  existence 
immediately  after    1861    and  no   National   bank 
notes  had  been  issued.     By  using  the  above  addi- 
tional amount  of  their  own  notes  during  the  above 
period,  the  people  would  have  saved  in  interest 
on  debt,  at  4  per  cent  only,  payable  quarterly 
and  compounded,  over  five  hundred  and  seventy- 
five  millions  of  dollars. 

Elasticity.  The  advocates  of  bank  notes  insist 
that  a  currency  ought  to  be  elastic,  ^'increasing 
and  decreasing  according  to  the  requirements  of 
legitimate  business,"  provided,  however,  the 
issuers  of  the  notes  possess  the  exclusive  power 


A  NATIONAL  CURRENCY. 


203 


to  work  the  "elasticity,"  and  to  decide  what  busi- 
ness is  legitimate.  This  and  other  arguments  in 
favor  of  bank  notes  are  frivolous ;  the  profit  which 
can  be  made  on  them  is  the  real  "milk  in  this 
cocoanut."  For  example,  if  National  banks,  as  in 
1882,  can  lend  or  exchange  $358,742,034  of  their 
bank  notes  bearing  no  interest,  for  commercial 
paper  at  the  current  rate  of  bank  discount,  then 
their  annual  profit,  assuming  it  to  be  6  per  cent,  is 
$21,524,522,  less  a  tax  of  i  per  cent  per  annum 
on  the  notes,  and  which  is  deemed  by  them  to  be 
a  grievous  burden.  The  money  which  the  notes 
represent  is  in  Government  bonds,  and  is  also 
drawing  interest. 

But  these  National  bank  notes  are  too  "inelas- 
tic" to  suit  the  advocates  of  bank  notes.  They 
want  to  issue  a  "  credit "  currency,  say  not  less 
than  $3  in  paper  for  one  in  specie,  actually  or 
theoretically  held  in  reserve  for  their  redemption. 
They  want  to  draw  interest  upon  three  or  more 
dollars,  all  of  which  are  wind  except  the  dollar  in 
specie  held  for  their  redemption,  or  supposed  so 

to  be. 

Mr.  Biddle,  president  of  the  Second  Bank  of 
the  United  States,  understood  elasticity  quite  as 
well  as  Mr.  McCulloch.  There  was  great  rivalry 
between  this  bank  and  the  State  banks  as  to 
which  should  supply  and  control  the  paper  circu- 
lation of  the  country.  And  Mr.  Biddle,  probably 
for  the  benefit  of  the  State  banks,  published  in 
April,  1828,  an  essay  in  answer  to  the  question: 


11 


204 


■ 


A  NATIONAL  CURRENCY. 


What  is  the  cause   and  nature   of  the   present 
scarcity  of  money?    His  answer  being,  in  sub- 
stance, overtrading  brought  on  by  overbanking. 
He  said :     "  The  constant  tendency  of  banks  is  to 
lend  too  much  and  to  put  too  many  notes  in  cir- 
culation, which  causes  a  rise  in  the  price  of  com- 
modities.     This  causes  large  importations,  while 
the  high  price  of  domestic  products  prevents  their 
exportation.    When  you  buy  more  from  foreign- 
ers  than  they  buy  from  you,  as  they  can  not  take 
the  paper  part  of  your  currency  they  must  take 
the  coin  part.     If  a  bank  lends  its  money  for  long 
terms  and  to  persons  careless  of  protests,  it  runs 
great  risk ;  on  the  one  hand  its  notes  are  payable 
on  demand,  while  on  the  other  its  debts  can  not 
be  called  in  without   great   delay.     But  a  well- 
managed  bank  has  its  funds  mainly   on  short 
loans  to  persons  in  business,  payable  on  a  day 
named,  which  the  parties  are  able  to  pay  and  will 
pay  at  any  sacrifice  in  order  to  escape  mercantile 
dishonor.     Such  a  bank  has  its  funds  constantly 
repaid  to  it  and  is  able  to  say  whether  it  will  or 
will   not    lend    them    out  again.     Such  a  bank, 
when  it  finds  there  is  too  much  demand  for  coin, 
declines  to  renew  the  loans  of  its  debtors.    Thus 
they  are  obliged  to  return  the  bank  notes  lent 
them  or  their  equivalents.      This  makes  bank 
notes    scarcer  and    more    valuable— this  makes 
goods  less  valuable— the  debtors  in  their  anxiety 
to  get  bank  notes  sell  their  goods  at  a  sacrifice— 
this  brings  down  prices  and  makes  everything 


A  NATIONAL  CURRENCY. 


205 


cheaper,  and  finally  stops  importations,  the 
demand  for  coin,"  etc.  ("Gouge  on  Banking,"  pub- 
lished in  1833,  Part  H,  p.  189.) 

According  to  Mr.  Biddle,  an  elastic  currency 
first    expands  by    liberal  issues  of  bank  notes; 
prices  rise,  inducing  importation  and  preventing 
exportation;  speculation  is  rife,  and  everybody 
flies  high  on  the  wings  of  credit.     But  the  ex- 
portation of  coin  puts  a  limit  to  the  expansion ;  the 
bag  of  wind  becomes  liable  to  explode.     Then  the 
"  well-managed  banks,"  who  have  made  their  loans* 
on  short  time  to  men  who  will  pay  at  any  sacrifice, 
insist  upon  payment  and  refuse  to  renew  their 
loans.    The  elastic  currency  contracts,  prices  fall, 
debtors  force  their  goods  on  the  market  and  im- 
poverish themselves  to  meet  their  notes ;  but  the 
"  well-managed  banks  "  get  out  with  whole  skins, 
while    their    customers    are    flayed    alive.     The 
other  banks  suspend  payment  and  many  of  them 
prove  to  be  insolvent ;  their  notes  fall  to  discount 
or  become  worthless.    According  to  the  ethics  of 
banking,  the  only  suspension  of  payment  which 
is  justifiable  under  any  state  of  facts  whatever  is 
a  bank  suspension. 

Mr.  Biddle  also  said:  "The  substitution  of 
credits  for  coin  enables  the  nation  to  make  its 
exchanges  with  less  coin,  and  of  course  saves  the 
expense  of  coin."  If  the  "credits"  were  in  the  form 
of  United  States  notes  the  nation  might  make 
the  saving,  but  when  the  "credits"  are  in  the 
form  of  bank  notes  the  banks  make  it.    These 


I 

% 


206 


A  NATIONAL  CURRENCY. 


^ 


printed  pieces  of  paper  cost  them  a  nominal  sum, 
but  cost  the  borrower  and  those  who  otherwise 
acquire  them  the  same  as  coin.  The  banks  charge 
the  same  interest  on  them  as  if  the  loan  were 
made  in  coin.  After  money  is  made  artificially 
scarce,  as  above,  all  the  debtor  can  hope  for  is  to 
save  his  name  and  credit  from  dishonor  by  the 
sacrifice  of  his  property ;  if  he  does  not  sell  it 
himself  the  sheriff  will  finally  do  it  for  him. 
When  the  banks,  the  Second  United  States  Bank 
included,  suspended  specie  payment,  the  nation 
enjoyed  the  benefit  of  a  currency  consisting  of 
bank  notes  at  a  variable  discount,  depending  upon 
the  supposed  solvency  of  the  bank  issuing  it,  and 
thereby,  perhaps,  saved  the  expense  of  coin  alto- 
gether. 

As  shown  by  Mr.  Biddle,  no  matter  how  many 
notes  banks  are  authorized  to  issue,  if  they  are 
loaned  on  long  time  or  to  persons  who  are  unable 
or  unwilling  to  pay  their  debts  when  due,  the 
currency  is  not  elastic,  for  that  quality  includes 
contraction  as  well  as  expansion.  The  present 
National  banks  thrust  their  notes  into  the  cur- 
rency when  received,  as  far  away  from  home  as 
possible,  and  cry  for  more ;  they  also  lend  out  as 
large  a  per  cent  of  their  deposits  as  the  law  will 
allow ;  therefore,  in  the  direction  of  expansion,  the 
present  currency  is  quite  elastic.  But  unless 
their  loans  are  made  on  short  time  to  persons 
who  will  pay  at  any  sacrifice,  the  currency  is  in- 
elastic   in  the  direction  of  contraction.    When 


A  NATIONAL  CURRENCY, 


207 


they  have  brought  on,  or  made  imminent,  a  finan- 
cial panic  by  lending  too  large  a  per  cent  of 
their  deposits  on  long  or  short  time,  with  a  nar- 
row margin  on  the  collaterals,  and  have  sur- 
rounded themselves  with  flocks  of  lame  ducks, 
they  expect  the  Jupiter  who  officiates  as  the 
Comptroller  of  the  Currency  to  nod  and  to  wink 
at  their  bogus  clearing-house  certificates.  If 
these  institutions  would  hold  their  notes  in  re- 
serve for  such  an  emergency,  the  sudden  expan- 
sion of  the  currency  at  that  time  by  their  issue 
might  avert  the  impending  panic  brought  on  by 
their  excessive  greed. 

The  lo  per  cent  tax  on  State  bank  circulation 
exterminated  State   bank  notes,  but    not  State 
banks.    These  banks  are  not  obliged  to  report  to 
the  Comptroller  of  the  Currency.     But  from  his 
report  for  1896,  Vol.  I,  p.  16,  the  condition  of  3,705 
State  banks  reporting  to  him  showed  the  follow- 
ing items:    Capital,  $240,i33»835  ;  deposits,  $695,. 
659,914;  loans,   $702,505,798;   stocks  and   bonds, 
$97,234,561  ;  also,  1,195  State  banks,  with  an  aggre- 
gate   capital   of  $87,985,913,   reported  dividends 
paid  of  $5,985,222,  the  average  being  6.8  per  cent ; 
also,  loan  and  trust  companies  to  the  number  of 
115,  with  capital  of  $52,715402,  paid  dividends 
amounting  to  $5,254,200,  an  average  of  9.9  per 
cent.     Of  the  savings  banks  1,299  reported  depos- 
its, $1,935,466,468,  of   which   $1,907,156,277  were 
savings  deposit  accounts;   loans,   $1,055,187,769; 
United  States  bonds,  $148,525,375;  other  bonds 


208 


A  NATIONAL  CURRENCY, 


«  V 


and  stocks,  $756,676,312;  surplus  and  undivided 
profits,  $174,714,993.  Such  is  the  showing  of 
these  concerns  during  a  period  of  hard  times 
ensuing  the  panic  of  1893.  There  are  also 
numerous  private  banks,  some  of  them  very 
large,  e.  g.  the  leading  exchange  houses. 

This  statement  proves  that  it  is  not  necessary 
to  hire  people,  with  or  without  capital  of  their 
own,  to  engage  in  the  legitimate  business  of 
banking,  by  authorizing  and  assisting  them  to 
establish  paper-money  factories  to  be  operated  in 
competition  with  the  Government  mint. 

The  proper  office  and  function  of  a  bank  is  to 
reduce  the  currency  and  not  to  increase  or  dilute 
it.     Having  a  capital  in  money  not  of  its  own 
manufacture,  others  deposit  money  with  it,  rely- 
ing upon  its  solvency.    There  is  a  book  account 
between  it  and   each  of  its  customers,  each   of 
whom,  to  the  extent  of  his  credit,  can  purchase 
property  and  pay  his  debts  by  checks  and  bills 
drawn   on  the   bank.     These  are  deposited  by 
those  who  receive  them  with  the  same  or  some 
other    bank.      The    various    banks    settle    their 
respective  claims  upon  each  other  by  an  exchange 
of  the  checks  and  drafts  drawn  on  them  respect- 
ively, paying  any  balances  in  money,  which  are 
usually  merely  nominal  sums.     Thus  the  great 
mass  of  moneyed  transactions  are  settled  by  an 
adjustment  of  mutual  accounts.    Great  financial 
centers  operate  as  clearing  houses  for  large  dis- 
tricts of  country,  New  York  being  the  financial 


W  : 


A  NATIONAL  CURRENCY. 


209 


center  tor  this  country,  and  London  for  Great 
Britain,  and  indeed  for  the  whole  commercial 
world.  By  the  legitimate  use  of  credit,  banks 
facilitate  exchanges  and  thereby  greatly  reduce 
the  quantity  of  money  which  would  be  otherwise 
required.  The  more  metallic  the  currency  the 
better  fitted  it  is  as  a  basis  for  these  credit  trans- 
actions. The  preeminence  of  London  as  the 
great  financial  center  is  largely  due  to  the  fact 
that  a  debt  payable  there  is  certain  to  be  paid,  if 
at  all,  in  gold  coin  of  a  fixed  weight  and  fineness. 

A  bank  with  an  actual  capital  of  its  own  and 
the  average  amount  of  its  deposits  has  an  ade- 
quate fund  to  operate  with.  In  fact,  such  banks 
eagerly  solicit  deposit  accounts,  and  many  of  them 
pay  interest  thereon,  thereby  paying  depositors  a 
bonus  for  the  privilege  of  keeping  their  money 
safely  and  paying  it  to  them  on  demand,  or  at 
least  agreeing  to  do  it.  The  profits  are  so  great 
that  a  law  is  necessary  to  prevent  them  from 
lending  too  large  a  per  cent  of  their  deposits,  and 
a  law  to  prevent  them  from  paying  interest  on 
deposit  balances  which  are  payable  on  demand 
would  probably  be  beneficial.  A  bank  which 
can  not  make  a  profit  out  of  its  actual  capital  and 
deposits  has  no  right  to  exist. 

Fractional  Paper  Curratcy.  By  the  summer  of 
1862  the  paper  inflation  caused  the  fractional  silver 
coins  to  disappear  from  circulation.  Under  the 
coinage  act  of  1853  their  bullion  value  was  about 
7    per    cent    less   than  standard    coin.     Postage 

14 


i 


210 


A  NATIONAL  CURRENCY. 


and  other  United  States  stamps  were  made  frac- 
tional currency,  in  lieu  of  which  fractional  notes 
were  authorized  by  act  of  March  3,  1863.  In  1877 
the  premium  on  specie  had  fallen  so  that  frac- 
tional silver  coins  could  be  and  were  substituted 
for  the  fractional  notes. 

The  population  of  the  United  States  in  i860 
was  31,443,321,  of  which,  in  1861,  about  one-third 
were  in  rebellion,  so  that  the  currency  required, 
under  the  facts  then  existing,  was  for  a  population 
of  about  twenty-one  millions  ;  in  1865,  for  a  pop- 
ulation of  about  thirty-four  millions ;  in  1 870,  for 
a  population  of  38,558,371  ;  in  1880,  for  a  popula- 
tion of  50,155783- 

The  inflation  of  the  currency  excluded  coin ; 
the  contraction  of  the  currency  reduced  prices  so 
that  specie  payments  could  be  and  were  resumed 
January  i,  1879,  ^^  which  time  and  since  green- 
backs have  been  redeemed  in  coin  (gold)  on  pre- 
sentation  for  that  purpose  at  the  office  of  the 
Assistant  Treasurer  of  the  United  States  in  the 
city  of  New  York,  in  sums  not  less  than  $50. 

The  paper  inflation  during  the  war  caused 
prices  to  rise,  i.  e.,  the  exchange  value  of  money 
to  fall.  The  Government  was  a  great  employer, 
buyer,  and  consumer ;  wages  were  high,  also  com- 
modities. The  ranks  of  the  army  could  be  filled 
by  paying  large  bounties,  after  the  ardor  for  vol- 
unteering was  past.  But  after  the  war  was  ended 
the  case  was  reversed.  The  Government  no 
longer  needed  an  immense  army  and  navy.    Con- 


A  NATIONAL  CURRENCY. 


211 


% 


traction  involves  falling  prices,  failing  debtors, 
and  a  decrease  in  the  army  of  speculators.  No 
financier  has  ever  invented  a  successful  financial 
scheme  which  will  cause  prices  forever  to  rise 
and  never  to  fall  or  collapse.  A  money  inflation 
produces  financial  intoxication,  which,  after  the 
"spree"  is  over,  results  in  reaction,  stagnation, 
collapse,  and  the  blue  devils.  After  the  panic 
of  1873,  an  inflation  of  the  paper  currency  was 
prevented  by  a  veto  from  President  Grant. 

A  single  gold  standard  ^diS  adopted  by  the  act  of 
February  12,  1873,  "revising  and  amending  the 
laws  relative  to  the  mints,  assay  offices,  and  coin- 
age of  the  United  States."  It  authorized  certain 
coins  therein  named,  and  none  other;  the  stand- 
ard silver  dollar  was  not  one  of  them.  Its 
metallic  value  then  was  a  little  more  than  a  dollar 
in  gold,  the  commercial  ratio  of  silver  to  gold  then 
being  15.92  to  i.  This  act  adopted  a  policy  which 
had  its  inception  in  the  act  of  1834  and  declared 
the  gold  dollar  of  the  standard  weight  of  25.8 
grains  to  be  the  unit  of  value. 

The  coins  thereby  authorized,  and  still  issued, 

are: 

Gold.    Double  eagle,  eagle,  half  eagle,  quarter 

eagle. 

Silver.     Half  dollar,  quarter  dollar,  dime. 

Nickel.  Five-cent  piece  — 75  percent  copper 
and  25  per  cent  nickel. 

Bronze.  Cent— 95  per  cent  copper  and  5  per 
cent  tin  and  zinc. 


i 


212 


A  NATIONAL  CURRENCY. 


i  I 


The  provisions  relating  thereto  as  contained  in 
the  revised  statutes  of  1 874  are  chiefly  as  follows : 

The  standard  for  both  gold  and  silver  coins  is 
nine-tenths  fine. 

The  standard  weight  of  the  double  eagle,  or 
twenty-dollar  piece,  is  516  grains;  of  the  other 
gold  coins  in  proportion;  of  the  half  dollar,  i2j4 
grams  (192.9  grains);  of  the  quarter  dollar  and 
dime,  in  proportion  thereto. 

Tolerance.  No  ingots  to  be  used  for  coinage 
which  shall  differ  from  the  legal  standard  more, 
in  gold  ingots,  than  0.00 1 ;  silver  ingots,  0.003  J 
five-cent  piece,  0.025,  in  the  proportion  of  nickel. 
In  adjusting  the  weight  of  the  coins  the  follow- 
ing deviations  shall  not  be  exceeded  in  any  single 
piece:  In  the  double  eagle  and  eagle,  half  a 
grain;  half  and  quarter  eagle,  one-fourth  of  a 
grain ;  half  and  quarter  dollar  and  dime,  one  and 
one-half  grains ;  five-cent  piece,  three  grains ;  cent, 
two  grains'. 

Devices  and  Legends.  On  one  side  there  shall 
be  an  impression  emblematic  of  liberty,  with  an 
inscription  of  the  word  '*  Liberty "  and  the  year 
of  the  coinage,  and  upon  the  reverse  shall  be  the 
figure  or  representation  of  an  eagle,  with  the  in- 
scriptions "United  States  of  America"  and  '*  E 
Pluribus  Unum,"  and  a  designation  of  the  value 
of  the  coin ;  but  on  the  dime,  ^v^  and  one  cent 
pieces  the  figure  of  the  eagle  shall  be  omitted. 

Legal  Tender,  No  foreign  gold  or  silver  coin 
shall  be  a  legal  tender  in  payment  of  debts. 


A  NATIONAL  CURRENCY. 


213 


The  gold  coins  of  the  United  States  shall  be  a 
legal  tender  in  all  payments  at  their  nominal 
value  when  not  below  the  standard  weight  and 
limit  of  tolerance  provided  by  law  for  the  single 
piece,  and  when  reduced  in  weight  below  such 
standard  and  tolerance,  shall  be  a  legal  ten- 
der at  valuation  in  proportion  to  their  actual 
weight. 

The  silver  coins  of  the  United  States  shall  be 
a  legal  tender  at  their  nominal  value  for  any 
amount  not  exceeding  five  dollars  in  any  one  pay- 
ment ;  since  raised,  as  to  the  fractional  silver  coins, 
to  ten  dollars. 

The  minor  coins  of  the  United  States  shall  be 
a  legal  tender,  at  their  nominal  value,  for  any 
amount  not  exceeding  twenty-five  cents  in  any 
one  payment. 

Abrasion,  Any  gold  coins  of  the  United  States, 
if  reduced  in  weight  by  natural  abrasion  not  more 
than  one-half  of  i  per  cent  below  the  standard 
weight  prescribed  by  law,  after  a  circulation  of 
twenty  years,  as  shown  by  the  date  of  coinage, 
and  at  a  ratable  proportion  for  any  period  less 
than  twenty  years,  shall  be  received  at  their  nomi- 
nal value  by  the  United  States  Treasury  and  its 
officers,  under  such  regulations  as  the  Secretary 
of  the  Treasury  may  prescribe  for  the  protection 
of  the  Government  against  fraudulent  abrasion  or 
other  practices. 

Any  gold  coins  in  the  Treasury  when  reduced 
in  weight  by  natural  abrasion  more  than  one-half 


214 


A  NATIONAL  CURRENCY. 


'    9 


.      , 


- 


;  { 


of  I  per  centum  below  the  standard  weight  pre- 
scribed by  law,  shall  be  recoined. 

The  coinage  of  standard  gold  bullion  is  free 
and  gratuitous  (act  of  January  14,  1875).  The 
coinage  of  the  fractional  silver  and  minor  coins 
is  done  on  Government  account. 

The  minor  coins  are  redeemed  at  the  Treasury 
and  its  offices  in  lawful  money  when  presented  in 
sums  of  not  less  than  twenty  dollars ;  when  it  ap- 
pears therefrom  that  the  amount  outstanding  is 
redundant,  the  Secretary  of  the  Treasury  is  re- 
quired to  direct  that  their  coinage  shall  cease 
until  otherwise  ordered  by  him. 

The  fractional  silver  coins  are  redeemed  in  law- 
ful money  at  the  office  of  the  Treasurer  or  any 
Assistant  Treasurer  when  presented  in  sums  of 
twenty  dollars  or  any  multiple  thereof,  and  are 
exchanged  in  like  manner  for  lawful  money  on 
demand.     (Act  of  June  9,  1 879.) 

The  value  of  foreign  coin^  as  expressed  in  the 
money  of  account  of  the  United  States,  shall  be 
that  of  the  pure  metal  of  such  coin  of  standard 
value ;  and  the  values  of  the  standard  coins  in 
circulation  of  the  various  nations  of  the  world 
shall  be  estimated  annually  by  the  Director  of  the 
Mint  and  be  proclaimed  on  the  first  day  of  Janu- 
ary by  the  Secretary  of  the  Treasury.  In  all  pay- 
ments by  or  to  the  Treasury,  whether  made  here 
or  in  foreign  countries,  when  it  becomes  neces- 
sary to  compute  the  value  of  the  sovereign  or 
pound    sterling,    it    shall    be  deemed   equal   to 


A  NATIONAL  CURRENCY. 


215 


$4.8665,  and  the  same  rule  shall  be  applied  in 
appraising  merchandise  imported  where  the  value 
is,  by  the  invoice,  in  sovereigns  or  pounds  ster- 
ling, and  in  the  construction  of  contracts  payable 
in  sovereigns  or  pounds  sterling ;  and  this  valu- 
ation shall  be  the  par  of  exchange  between  Great 
Britain  and  the  United  States. 

The  weights  of  the  metric  system  were  legalized. 
The  following  coins  have  been  issued  at  various 
times  and  their  coinage  afterward  discontinued : 
Gold.    Dollar,  three-dollar  piece. 
Silver.    Trade  dollar,  twenty-cent  piece,  half- 
dime;  three-cent  piece. 

Nickel.    Three-cent  piece,  cent. 
Bronze.     Two-cent  piece. 
Copper.    Cent,  half-cent. 

The  Silver  Dollar.  By  the  act  of  February  28, 
1878,  "  To  authorize  the  coinage  of  the  standard 
silver  dollar,  and  to  restore  its  legal -tender 
character,"  it  was  provided:  "There  shall  be 
coined,  at  the  several  mints  of  the  United  States, 
silver  dollars  of  the  weight  of  412.50  grains  troy 
of  standard  silver,  as  provided  in  the  act  of 
January  18,  1837,  on  which  shall  be  the  devices 
and  superscriptions  provided  by  said  act ;  which 
coins,  together  with  all  silver  dollars  heretofore 
coined  by  the  United  States,  of  like  weight  and 
fineness,  shall  be  a  legal  tender,  at  their  nominal 
value,  for  all  debts  and  dues,  public  and  private, 
except  where  otherwise  expressly  stipulated  in 
the  contract.    And  the  Secretary  of  the  Treasury 


\\\ 


m 


I! 

t 


' 


H  - 


216 


A  NATIONAL  CURRENCY, 


is  authorized  and  directed  to  purchase,  from  time 
to  time,  silver  bullion  at  the  market  price  thereof, 
not  less  than  two  million  dollars'  worth  per  month 
nor  more  than  four  million  dollars'  worth  per 
month,  and  cause  the  same  to  be  coined  monthly, 
as  fast  as  so  purchased,  into  such  dollars ;"  any 
gain  or  seigniorage  arising  from  this  coinage  shall 
be  accounted  for  and  paid  into  the  Treasury. 
Certificates  for  gold  coin  and  bullion  deposited  in 
the  Treasury  were  not  to  be  paid  in  silver  dollars. 

This  act  also  provided  that  any  holder  of  silver 
dollars  might  deposit  the  same  with  the  Treasurer 
or  any  Assistant  Treasurer  of  the  United  States 
in  sums  not  less  than  %\o  and  receive  therefor 
certificates  of  not  less  than  $io  each,  correspond- 
ing with  the  denominations  of  the  United  States 
notes.  The  coin  deposited  for  or  representing  the 
certificates  shall  be  retained  in  the  Treasury  for 
the  payment  of  the  same  on  demand,  such  certifi- 
cates to  be  receivable  for  customs,  taxes,  and  all 
public  dues,  and,  when  so  received,  may  be  reis- 
sued. By  the  act  of  August  4,  1886,  the  issue  of 
silver  certificates  of  the  denominations  of  one, 
two,  and  five  dollars  were  authorized. 

The  coinage  act  of  January  18,  1837,  provided 
that  no  silver  ingots  should  be  used  for  coinage 
of  which  the  quality  differs  more  than  three- 
thousandths  from  the  legal  standard  (i.  e.,  nine- 
tenths  fine);  and  in  adjusting  the  weights  of  the 
coins,  the  following  deviations  from  the  standard 
weight  shall  not  be  exceeded  in  any  of  the  single 


A  NATIONAL  CURRENCY. 


217 


pieces :  in  the  dollar,  one  grain  and  a  half.  Per- 
haps, therefore,  under  the  act  of  February  28, 
1878,  a  silver  dollar  is  a  legal  tender,  provided  its 
fineness  is  not  less  than  0.897,  and  its  weight  not 
less  than  411  grains. 

By  the  act  of  July  14,  1890,  the  Secretary  of 
the  Treasury  was  directed  to  purchase,  from  time 
to  time,  silver  bullion  to  the  aggregate  amount  of 
four  million  five  hundred  thousand  ounces,  or 
so  much  thereof  as  may  be  offered  in  each  month, 
at  the  market  price  thereof,  not  exceeding  $1  for 
371%  grains  of  pure  silver,  and  to  issue  in  pay- 
ment of  such  purchases  of  silver  bullion,  Treas- 
ury notes  of  the  United  States,  to  be  prepared  by 
the  Secretary  of  the  Treasury,  in  such  form  and 
of  such  denominations,  not  less  than  $1  nor  more 
than  $1,000,  as  he  may  prescribe,  which  notes 
shall  be  redeemable  in  coin  at  the  Treasury  of 
the  United  States  or  at  the  office  of  any  Assistant 
Treasurer  of  the  United  States,  and  when  so 
redeemed  may  be  reissued,  but  no  greater  or 
less  amount  of  such  notes  shall  be  outstanding  at 
any  time  than  the  cost  of  the  silver  bullion  and 
the  standard  silver  dollars  coined  therefrom  then 
held  in  the  Treasury  purchased  by  such  notes, 
which  notes  shall  be  a  legal  tender  in  payment  of 
all  debts,  public  and  private,  except  otherwise 
expressly  stipulated  in  the  contract,  and  shall  be 
receivable  for  customs,  taxes,  and  all  public  dues, 
and  when  so  received  may  be  reissued.  That  on 
demand  of  the  holder  of  any  of  the  said  notes 


ii 

\ 


218 


;  ? 


H 
it 


i 


i 


^  NATIONAL  CURRENCY. 


the  Secretary  of  the  Treasury  shall,  under  such 
regulations  as  he  may  prescribe,  redeem  them  in 
gold  or  silver  coin,  at  his  discretion,  it  being  the 
established  policy  of  the  United  States  to  main- 
tain the  two  metals  on  a  parity  with  each  other 
upon  the  present  legal  ratio,  or  such  ratio  as  may 
be  provided  by  law.     That  the  Secretary  of  the 
Treasury    shall  each    month    coin    two  million 
ounces  of  the  silver  bullion  purchased  under  this 
act,  into  silver  dollars,  until  July  i,  1891,  and  after 
that  time  he  shall  coin  as  much  of  the  bullion  as 
may  be  necessary  to  provide  for  the  redemption 
of  the  Treasury  notes  herein  provided  for,  any 
gain  or  seigniorage  arising  from  such  coinage  to 
be  accounted    for  and    paid  into   the   Treasury, 
the  purchase  clause  of  the  act   of   February  28,' 
1878,  being,  by  this  act,  repealed.     By  the  act  of 
November  i,  1893,  the  purchase  clause  of  the  act 
of  July    14,    1890,   was  repealed,    it  being    also 
stated  that  it  is  hereby  declared  to  be  the  policy 
of  the  United  States  to  continue  the  use  of  both 
gold  and  silver  as  standard  money,  and  to  coin  both 
gold  and  silver  into  money  of  equal  intrinsic  and 
exchangeable  value,  such  equality  to  be  secured 
through  international  agreement,  or  by  such  safe- 
guards  of  legislation  as  will  insure  the  mainte- 
nance of  the  parity  in  value  of  the  coins  of  the  two 
metals,  and  the  equal  power  of  every  dollar  at  all 
times  in  the  markets  and  in  the  payment  of  debts. 
And  it  is  hereby  further  declared  that  the  efforts 
of  the  Government  should  be  steadily  directed  to 


A  NATIONAL  CURRENCY.  21& 

the  establishment  of  such  a  safe  system  of  bimet- 
allism as  will  maintain  at  all  times  the  equal  power 
of  every  dollar,  coined  or  issued  by  the  United 
States,  in  the  markets  and  in  the  payment  of  debts. 
Gold  Certificates.     By  the  act  of  July  12,  1882, 
the  Secretary  of  the  Treasury  was  authorized  and 
directed  to  receive  deposits  of  gold  coin  with  the 
Treasurer  or  assistant  treasurers  of  the  United 
States  in  sums*  not  less  than  $20,  and  to  issue 
certificates  therefor    in  denominations    not  less 
than  $20  each,  corresponding  with  the   denom- 
inations of  the  United  States  notes.    The  coin 
deposited    for,    or  representing,  the  certificates 
of  deposits  shall  be  retained  in  the  Treasury  for 
the  payment  of  the  same  on  demand,  which  shall 
be  receivable    for  customs,  taxes,  and  all  public 
dues,  and  when  so  received  may  be  reissued ;  also 
that  the  Secretary  of  the  Treasury  shall  suspend 
the  issue  of  such  certificates  whenever  the  gold 
coin    held    in    the    Treasury    reserved    for    the 
redemption  of  United  States  notes  falls  below 

$100,000,000. 

The  money  of  the  United  States,  on  July  i, 
1896,  according  to  the  report  of  the  Treasury 
Department,  consisted  of : 

Gold  coin $567,931,823 

Silver  dollars 430,790,041 

Fractional  silver  coin 75 .730,781 

United  States  notes 346,681 ,016 

Treasury  notes 129,683,280 

National  bank  notes 226,000,547 

Total $1,776,817,488     , 


220 


A  NATIONAL  CURRENCY. 


i    v 


To  which  add  the  nickels  and  cents.  The 
Treasury  held  $111,803,340  in  gold,  of  which 
$42,818,189  was  represented  in  circulation  by  gold 
certificates.  The  various  banks  and  banking 
concerns  held  about  $300,000,000,  and  the  residue 
was  estimated  as  held  among  the  people,  gold 
com  being  rarely  seen  in  circulation,  unless  in 
California. 

The  silver  dollars,  excepting  about  sixty 
millions,  were  represented  in  circulation  by  silver 
certificates.  Experience  proves  that  less  than  one 
silver  dollar  per  unit  of  population  is  all  that  can 
be  kept  in  circulation;  any  excess  is  returned  to 
the  Treasury  and  certificates  taken  out  instead 
The  free  coinage  of  silver  signifies  a  currency  of 
silver  certificates  with  the  silver  warehoused  in 
the  Treasury;  without  them  the  people  would  not 
tolerate  a  bulky  currency  of  silver  dollars. 

The  fractional  silver  and  minor  coins  being 
necessary  in  any  case,  in  commenting  on  the 
currency  they  may  be  omitted. 

The  quantity  of  United  States  notes  is  a  fixed 
amount,  which  is  probably  diminished  by  loss 
from  use  and  accident. 

The  quantity  of  Treasury  notes  decreases  as 
the  silver  purchased  by  them  is  coined  into 
dollars. 

The  National  bank  notes  are  a  variable  quan- 
tity, and  are  redeemable  in  lawful  money  at  the 
bank  of  issue;  also  at  the  Treasury  in  United 
States  notes,  when  presented  for  redemption  in 


A  NATIONAL  CURRENCY. 


221 


sums  of  $1,000  or  any  multiple  thereof.  In 
October,  1896,  there  were  3,679  National  banks; 
also  4,944  State  banks  and  trust  companies;  764 
(State)  savings  banks,  and  3,552  private  banks. 
(Report  of  the  Comptroller  of  the  Currency  for 
1896,  Vol.  I,  p.  33.)  As  only  National  banks  can 
issue  bank  notes,  their  issue  is  no  essential  part 
of  the  banking  business,  for  otherwise  all  State 
and  private  banks  would  have  died  out. 

The  above  statement  shows  that  the  money  of 
the  United  States  consists  of  about  one-third 
standard  gold  coin  and  two-thirds  paper  and  silver 
dollar  tokens,  the  bullion  value,  in  1897,  of  the 
silver  dollar  being  less  than  one-half  its  nominal 
or  legal-tender  value. 

During  the  administration  of  Mr.  Cleveland 
there  was  a  great  demand  for  gold,  caused  by  the 
inflated  condition  of  the  currency,  the  proposal 
indorsed  by  him  to  repeal  the  10  per  cent  tax  on 
State  bank  notes,  and  the  renewed  agitation  for 
free  silver.  Owners  of  foreign  capital  wanted  to 
remove  it  from  the  country,  and  home  capitalists 
preferred  gold  coin  to  silver  dollars  or  bank  notes 
redeemable  in  them,  and  followed  the  example 
set  by  the  banks  of  hoarding  gold.  This  demand 
fell  on  the  gold  reserve  held  by  the  Government 
for  the  redemption  of  the  United  States  and 
Treasury  notes,  gold  not  being  obtainable  in 
exchange  for  silver  dollars,  silver  certificates,  or 
bank  notes.  During  the  fiscal  years  1895  and  1896 
the  net  export  of  gold  exceeded  $109,000,000. 


222 


A  NATIONAL  CURRENCY, 


The  Secretary  of  the  Treasury  (Mr.  Carlisle), 
in  his  December,  1894,  report,  said,  concerning  the 
demand  for  gold :  "  With  a  current  revenue  in- 
adequate to  defray  the  ordinary  current  expenses, 
and  practically  no  receipts  of  gold  from  customs 
or  other  sources,  it  was  evident  that  the  Treasury 
would  be  unable  to  meet  even  the  usual  demand 
for  export,  which,  however,  would  probably  be 
much  augmented  by  the  increased  apprehension 
produced  by  the  depleted  condition  of  the  re- 
serve." 

The  ''usual  demand  for  export"  arose  and 
arises  from  stuffing  the  currency  with  tokens.  If 
the  act  of  July  14,  1890,  for  the  purchase  of  fifty- 
four  million  ounces  of  silver  bullion  per  annum 
had  not  been,  providentially,  repealed  November 
I,  1893,  there  would  have  been  added  to  the 
already  overstock  of  silver,  by  November  i,  1897, 
two  hundred  and  sixteen  million  ounces,  which 
would  make,  when  coined,  $278,640,000  in  silver 
dollars.  A  repeal  of  the  10  per  cent  tax  on  State 
bank  notes  would  have  flooded  the  already  in- 
flated currency  with  that  kind  of  paper  tokens. 
The  free  coinage  of  silver  would  have  dumped 
an  immense  quantity  of  that  material  into  the 
already  bloated  currency. 

There  were  ''practically  no  receipts  of  gold  from 
customs  or  other  sources''  because  silver  dollars, 
silver  certificates,  and  Treasury  notes  were  pay- 
able and  paid  for  duties  on  imports,  and  other 
revenues  were  payable  in  silver  dollars,   silver 


III 


A  NATIONAL  CURRENCY. 


223 


certificates,  National  bank  notes.  Treasury  notes, 
and  greenbacks,  and  paid  in  them,  greenbacks  and 
Treasury  notes  excepted. 

Secretary  Carlisle,  in  his  December  (1896)  re- 
port, said  the  excess  of  expenditures  during 
the  three  fiscal  years  1894-5-6  over  the  receipts 
from  the  ordinary  sources  of  revenue  was  $1 37,- 
811,729.46.  And  he  estimated  a  deficit  for  the 
fiscal  year  1897  of  $64,500,000;  and  for  the  fis- 
cal year  1898  of  $45718,970.60.  He  also  said 
therein:  Since  March  i,  1893,  United  States 
bonds  to  the  amount  of  $262,315,400  have  been 
issued  and  sold  for  $293,481,894.90  in  gold.  Also 
that :  Singe  the  resumption  of  specie  payments 
on  January  i,  1879,  United  States  notes  to  the 
amount  of  $470,490,987,  and  Treasury  notes  issued 
under  the  act  of  1890  to  the  amount  of  $86,428,881, 
have  been  redeemed  in  gold. 

The  $262,315,400  of  bonds  were  issued  and  sold 
tinder  the  resumption  act  of  January  14,  1875,  to 
replenish  the  gold  reserve ;  the  United  States  and 
Treasury  notes  redeemed  were  reissued  in  pay- 
ment of  expenditures,  and  thus  the  deficit  in  the 
revenue  was  made  good.  By  the  sale  of  these 
bonds  a  suspension  of  payment  of  all  kinds  of  de- 
mands in  any  kind  of  money  was  avoided.  The 
great  demand  for  gold  to  export  and  to  hoard  was 
a  godsend  to  this  low-tariff  administration. 

If  gold  is  bought  for  redemption  purposes  and 
to  maintain  the  gold  standard,  and  Government* 
notes  are  redeemed  in  gold,  and  the  notes  there- 


Il    ' 


224 


A  NATIONAL  CURRENCY. 


upon  are  paid  out  for  expenditure,  there  is  noth- 
ing to  be  charged  to  the  notes  as  cost  for  their 
redemption. 

In  1877  ^^^  1878  ninety  millions  of  bonds  were 
sold  for  gold  which  was  held  for  resumption  pur- 
poses ("Money  and  Politics,"  Upton,  pp.  150-52), 
("United  States  Notes,"  Knox,  p.  141).  And  no 
more  bonds  were  sold  for  resumption  purposes 
until  those  issued  and  sold  by  Secretary  Carlisle 
as  above  mentioned. 

The  gold  reserve  January  i,  1879,  proved  to  be 
unnecessarily  large.  At  that  date  the  amount  of 
coi^  held  in  the  Treasury  as  available  for  resump- 
tion purposes,  after  deducting  all  matured  coin 
liabilities,  was  $135,000,000;  and  during  that 
entire  year  only  $1 1,456,536  in  legal-tender  notes 
were  presented  for  redemption  ("Money  and 
Politics,"  Upton,  p.  155). 

The  receipts  from  customs  (coin)  during  the 
fiscal  year  1864  were  $102,316,152.99;  in  1866, 
$179,046,651.58;  in  1867,  $176,417,810.88  ("Mc- 
pherson's Histor>'  of  Reconstruction,"  p.  375). 
By  the  act  of  March  17,  1864,  the  Secretary  of  the 
Treasury  was  authorized  to  anticipate  the  pay- 
ment of  interest  on  the  public  debt  by  a  period 
not  exceeding  one  year,  either  with  or  without  a 
rebate  of  interest  on  the  coupons,  as  to  him  might 
seem  expedient ;  also,  to  dispose  of  any  gold  in 
the  Treasury  not  necessary  for  the  payment  of 
'interest  on  the  public  debt,  etc.    Sales  of  gold 


i 


A  NATIONAL  CURRENCY. 


225 


were    thereafter    frequently    made    during  and 
after  the  war. 

Whether  legal-tender  notes  were  redeemed  on 
and  after  January  i,  1879,  with  ^^^^  received  from 
customs  or  with  coin  belonging  to  the  gold  reserve, 
and  the  notes  reissued  in  payment  of  expendi- 
tures, there  is  no    proper  charge  to    be    made 
against  them  for  the  cost  of  their  redemption. 
Suppose  the  reserve  held  for  resumption  purposes 
was  originally  intended  to  be,  and  in  fact  was, 
$100,000,000;  to  this  add  $293,481,894.90  realized 
by  Secretary  Carlisle  from  the  bonds  sold  by  him; 
there  ought  to  be  now  in  the  Treasury  a  gold 
reserve  of  $393, 481, 894. 90»    ^^^    ^11    the  United 
States  notes  are  still  outstanding ;  also  all  of  the 
Treasury  notes  which  have  been  redeemed  in 
gold.    But  the  fact  is,  that  not  only  the  whole  of 
the  original  gold  reserve,  but  also  that  added  to  it 
by  Secretary  Carlisle,  except  the  part  of  it  which 
may  still  remain  in  the  Treasury,  has  been  used 
in  payment  of  current  expenses,  in   this  way, 
to  wit,  United  States  and  Treasury  notes  being 
redeemed  in  gold  have   been  reissued  and  paid 
out  in  discharge  of  Government  dues. 

Whatever  charge  is  proper  against  the  United 
States  notes  on  account  of  the  gold  reserve,  no 
charge  can  be  made  against  them  for  any  part  of 
the  $86,428,881  paid  out  in  gold  for  the  redemp- 
tion of  Treasury  notes.  Secretary  Carlisle  said : 
"Since  the  resumption  of  specie  payments  in 
January  i,  1879,  United  States  notes  to  the  amount 


16 


226  A  NATIONAL  CURRENCY. 

of  $470490,987  have  been  redeemed  in  gold,"  i.  e. 
to  December,  1 896.  How  can  this  be,  for  the  gold 
reserve  proper  is  not  over  $100,000,000? 

By  the  act  of  February  28,  1878,  for  the  coinage 
of  silver  dollars,  only  twenty-four  million  dollars* 
worth  of  silver  bullion  was  coined  per  annum,  so 
that  for  a  long  period  of  time  duties  on  imports 
were  paid  almost  entirely  in  gold.  But  as  time 
elapsed  the  quantity  of  silver  dollars  and  silver 
certificates  increased,  and  also  the  part  of  the 
customs  paid  in  them.  By  the  act  of  July  14, 1890, 
four  and  one-half  million  ounces  of  silver  bullion 
were  to  be  and  were  purchased  monthly,  and 
Treasury  notes  issued  therefor,  which  notes  were 
also  receivable  for  customs,  so  that  by  1893,  as 
Secretary  Carlisle  said,  there  were  "practically  no 
receipts  of  gold  from  customs  or  other  sources." 
According  to  his  reports  for  1894  and  1896,  the 
receipts  from  customs  were,  for  the  fiscal  years — 

1893 $203,355,016  73 

1894 131,818,530  62 

1895 152,158,617  45 

1896 160,021,751  67 

Suppose  these  amounts  had  been  paid  in  gold, 
or  chiefly  in  gold,  as  duties  were  in  1879  ^^^  ^or 
a  long  time  thereafter,  legal-tender  notes  could 
have  been  redeemed  with  the  gold,  and  the  notes 
thereupon  paid  out  for  Government  dues  con- 
tinually and  to  very  large  amounts.  But  by 
stuffing  the  currency  with  bank  notes.  Treasury 
notes,  silver  dollars,  and  silver  certificates,  the 


A  NATIONAL  CURRENCY. 


227 


Government  has  been  put  into  the  condition  that 
if  gold  is  demanded  on  any  liability  which  is  pay- 
able in  coin— e.  g.,  funded  debt,  interest  thereon, 
etc. — the  gold  must  be  bought  or  payment  in  gold 
refused,  for  an  exchange  of  Treasury  notes  and 
greenbacks  for  gold  is  an  unreliable  makeshift. 
The  evil  day  was  only  deferred  by  the  repeal  of 
the  silver  purchase  act  of  1890,  and  the  purchase 
of  $293,481,894.90  in  gold  by  Secretary  Carlisle. 

The  redeeming  and  reissue  (in  payment  of 
expenses)  of  the  legal-tender  notes  was  called  by 
Mr.  Cleveland  "an  endless  chain,"  which  worked 
well  for  him.  But  as  he  believed  that  his  suc- 
cessor by,  e.  g.,  a  McKinley  bill,  would  raise  a 
revenue  sufficient  to  pay  expenses,  he  recom- 
mended, as  a  parting  bequest,  the  withdrawal  and 
cancellation  of  the  legal-tender  notes,  at  which 
suggestion  the  whole  banking  fraternity  pricked 
up  their  ears.  For,  with  an  adequate  revenue,  the 
notes  could  not  be  reissued  after  their  redemption 
(unless  they  were  given  away).  This  great  void 
in  the  currency  might  be  filled  with  bank  notes, 
but  the  free  silver  party  think  it  might  be  filled 
with  silver  dollars,  and  if  bank  notes  were  sup- 
pressed that  void  also  might  be  filled  with  the 
same  metal. 

Perhaps  if  the  currency  were  let  alone,  the 
country  might  eventually  grow  out  of  its  present 
financial  slough  of  despond.  But  if  it  is  to  be 
doctored    in   order  to  make  it  "sound,"   and  a 


228 


A  NATIONAL  CURRENCY. 


money  commission  composed  of  experts  is  to  be 
appointed  to  suggest  the  proper  method,  perhaps 
it  would  be  judicious  to  have  such  commission 
composed  one-half  of  bankers  and  the  other  half 
of  free  silverites. 

When  the  Government  **  goes  out  of  the  bank- 
ing business,"  by  withdrawing  the  United  States 
and  Treasury  notes,  e.  g.,  by  funding  them,  it  will 
be  necessary  also  to  abolish  the  currency  bureau, 
and  repeal  the  act  making  bank  notes  a  legal 
tender  to  and  from  the  Government.  When  gold 
is  needed  to  pay  interest  or  principal  of  the  public 
debt,  or  for  any  purpose  requiring  it,  the  gold 
must,  as  now,  be  bought. 

Those  engaged  or  ready  to  engage  in  ''the 
banking  business  "  of  issuing  paper  money  insist 
that  a  "  sound  "  currency  might  and  ought  to  con- 
sist of  bank  notes  redeemable  in  **  lawful  money." 
With  the  Government  notes  out  of  the  way  this 
would  be  gold  coin  and  silver  dollars.  If  the 
bank  notes  were  made  redeemable  in  gold  coin 
only,  that  would  violate  "  the  established  policy 
of  the  United  States  to  maintain  the  parity 
between  the  two  metals."  Supposing  the  cur- 
rency to  consist  of  one-third  standard  coin  and 
two-thirds  bank  notes ;  there  is  already  a  sufficient 
or  nearly  sufficient  stock  of  silver  for  the  purpose. 
For  there  was  purchased  and  coined  under  the 
act  of  February  28,  1878,  291,272,018.50  fine 
ounces,  and  under  the  act  of  July  14,  1890,  168,- 
674,682.53  fine  ounces  (Mint  Report  of  1895,  p. 


A  NA  TIONAL  CURRENCY. 


229 


209).   These  amounts  taken  together  are  sufficient 
to  coin  into  $594,665,089  in  silver  dollars. 

The  advocates  of  free  silver  think  that  a 
"sound"  and  simple  currency  might  and  should 
consist  of  silver  dollars  and  silver  certificates.  It 
is  quite  obvious  that  a  silver  certificate  is  quite  as 
"  elastic  "  as  a  bank  note  for  the  same  amount. 

Instead  of  the  present  mongrel  currency,  the 
money  of  the  United  States  might  have  consisted 
of  two-thirds    gold  coin  and    one-third    United 
States  notes.    There  was  coined  at  the  mints  of 
the  United  States  from  January  i,  1873,  to  June 
30,  1896,  $1,020,722,143  in  gold  coin,  which,  with  a 
part    of  the    $793,970,110  coined  prior  to   1873, 
would  have  been  quite  sufficient  for  the  purpose. 
In    such    case    any   demand    for    an    additional 
quantity  of  paper  money  for  use  in  active  circu- 
lation could  have  been  supplied  by    additional 
issues  of  United  States  notes  for  a  like  amount  in 
gold  coin  deposited  in  the  Treasury.    This  coin 
would  have  been  quite  sufficient  to  redeem  all 
the  notes  which  would  ever  have  been  presented 
for  that  purpose.    The  United  States,  Treasury, 
and  National  bank  notes  outstanding  July  i,  1896, 
amounted  to  $702,364,843,  to  which  add  the  silver 
and  gold  certificates  to  ascertain  the  amount  of 
paper  money  then  extant.    With  a  currency  as 
above,  the  "  endless  chain  "  would  have  needed  no 
lubrication.    Also,  a  greenback  is  as  "elastic"  as 
a  bank  note  for  the  same  amount. 

If  the  gold  standard  is  to  be  maintained  the 


230 


A  NATIONAL  CURRENCY. 


National  bank  notes  ought  to  be  suppressed; 
State  bank  notes  kept  so ;  no  more  silver  dollars 
coined ;  and  the  present  stock  of  them  and  of  un- 
coined  bullion  recoined  at  the  commercial  ratio. 
There  is  at  present  more  than  loo  per  cent  profit 
in  coining  silver  dollars  and  shipping  them  into 
the  country.  And  this  practice  has  commenced 
on  quite  a  large  scale.  (Report  of  the  Director  of 
the  Mint  for  1896,  p.  in.) 

In  the  interest  of  a  bank-note  currency  it  is 
insisted  that  while  United  States  notes  are  good, 
and  of  a  uniform  value  at  all  times  and  places! 
yet,  like  many  other  good  things,  they  are  too 
expensive.  And  to  magnify  this,  the  endless 
chain  argument  has  been  worked  to  an  absurd 
extent  by  persons  high  in  office,  as  see  Report 
of  the  Comptroller  of  the  Currency  for  1896,  p. 
108.  The  United  States  notes  being  still  out- 
standing, the  gold  reserve  held  for  their  redemp- 
tion ought  to  be  in  the  Treasury  in  its  entirety, 
no  matter  how  often  the  notes  have  been 
redeemed,  unless  on  their  reissue  they  were 
given  away.  As  before  stated,  the  original  gold 
reserve  consisted  of  the  proceeds  of  the  sale  of 
bonds  to  the  amount  of  $90,000,000,  of  which 
$65,000,000  bore  interest  at  414  per  cent,  and 
$25,000,000  at  4  per  cent.  The  4^  per  cents  were 
sold  at  I  y2  per  cent  premium,  the  4  per  cents  at 
par.  The  interest  annually  on  the  $90,000,000 
was  $3,925,000.  From  January  i,  1879,  to  Jan- 
uary I,  1897,  is  eighteen  years,  for  which  period 


A  NATIONAL  CURRENCY, 


231 


the  above  annual  interest  amounted  to  $70,650,000. 
If  the  greenbacks  had  been  funded  January  i, 
1879,  to  wit,  $346,681,016  into  $250,000,000  of  4j^ 
per  cents  and  $96,681,016  into  4  per  cents,  the 
people  would  have  been  taxed  annually  the  inter- 
est on  these  sums,  to  wit,  $15,1 17,240.64,  which  in 
eighteen  years  make  an  aggregate  $272, 109,33 1 .62. 
Deducting  from  this  the  interest  paid  on  the 
ninety  millions  of  bonds,  to  wit,  $70,650,000, 
leaves  $201,459,331.62  as  the  amount  saved  by  the 
people  during  the  eighteen  years  by  using  their 
own  notes  for  money.  And  a  much  greater 
amount  than  this  would  have  been  saved  if 
United  States  notes  had  occupied  the  place  of 
the  National  bank  notes.  For  the  currency 
would  have  been  no  more  inflated  with  paper 
money,  and  no  greater  gold  reserve  would  have 
been  required  to  maintain  the  gold  standard. 
All  of  the  legitimate  banking  business  would 
have  been  done  by  State  and  private  banks,  issu- 
ing no  paper  tokens.  Since  March  3,  1883,  the 
National  banks  have  paid  a  tax  of  i  per  cent 
annually  on  their  circulation,  and  before  and 
since  that  time  they  have  paid  no  other  taxes 
than  have  been  charged  to  other  banks,  nor  have 
they  performed  any  services  for  the  Government 
which  such  other  banks  could  not  have  rendered 
and  gained  a  large  profit  thereby. 

It  is  about  time  for  the  Government  to  regulate 
the  value  of  money  by  furnishing  the  whole  of  it, 
either  gold  coin  and  paper  representing  it  or 


232 


A  NATIONAL  CURRENCY, 


silver  coin  and  paper  representing  it.  No  bank 
notes  are  needed  in  either  case.  Bimetallism  is 
impossible  except  at  the  commercial  ratio,  and 
that  has  become  so  variable  that  no  one  nation 
can  now  control  it. 


Date  Due 


»' 

» t 


JUL  -6  W^^> 


END  OF 
TITLE 


